Call Options Or Put Options On SolarCity (SCTY)?
SolarCity (SCTY) sells or leases solar energy systems to residential and commercial customers in the US. As I’ve mentioned before, SCTY is another Elon Musk company (like Tesla (TSLA) and others) – and Musk always seems to be involved with buzz-worthy companies.
As of this writing, SCTY is trading for $36.01. The shares are up an eye-popping 176% year-to-date. The stock is 291% off its 52-week low of $9.20 and still 32% below the 52-week high of $52.77.
Is this an opportunity to buy call options on SCTY due to the company’s continued growth of installations, such as the ones at Walmart (WMT)? Or should you buy put options on SCTY because the company’s still a long way from profitability?
The bulls make a convincing argument…
SolarCity continues to ramp up installations (and revenue). The company just completed 10 projects for Walmart in Maryland. The installations are expected to provide 5 to 20 percent of each store’s electricity.
It’s deals like this which could really slingshot SCTY to profitability. As the company gains exposure doing installations (and saving money) for retail giants like Walmart, more and more retail companies could follow suit.
After all, there’s nothing like saving money and getting good publicity for using green energy. The trend towards solar could really benefit SCTY – and send the company’s revenues skyrocketing.
But the bears have a compelling case as well…
SCTY is one of the market’s “it” stocks. That’s often the case with an Elon Musk company (such as TSLA). But are investors getting ahead of themselves?
The company is expected to lose over $5 per share in the current year. And, it’s still expected to lose over $1 per share next year.
Meanwhile, the stock’s currently trading at 19x sales and 13x book value. That’s a hefty valuation for a company not expected to be profitable anytime soon.
Does SCTY’s continued installation growth with a company like Walmart make it worth buying? Or is the seemingly long road to profitability more of a concern?
If you think the bulls are right, take a look at buying the SCTY August $40.00 calls for around $2.60.
If you think the bears are right, take a look at buying the SCTY August $30.00 puts for around $2.50.
Yours in Profit,
Gordon Lewis
Category: Options Trading
