Sun Sets On Near-Term Catalysts For Vivint Solar, Deutsche Bank Downgrades

Patient Vivint Solar Inc (NYSE: VSLR) investors may eventually be rewarded by the long-term benefits of some of the recent strategic sales initiatives the company has undertaken. However, not all investors have that kind of patience.

Vivint shares plummeted 10 percent on Wednesday morning after the company reported disappointing second-quarter earnings, and Deutsche Bank analyst Vishal Shah now believes there are few potential bullish catalysts for the stock in the near-term. Deutsche Bank downgraded the stock from Buy to Hold and cut its price target from $6.00 to $5.50.

Shah said the early signs of improving financials are already baked into the stock’s share price.

“We believe some of the recent strategic sales initiatives that negatively impacted volumes and market share would likely drive overall profitability improvement in the long term, but we see limited near term catalysts,” Shah wrote.

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The stock’s weakness comes after the company reported Q2 installs of 47MW, down 23 percent from a year ago. In addition, Vivint lowered its full-year guidance to only 185-200MW. Shah pointed out that these projections are significantly worse than rival Sunrun Inc (NASDAQ: RUN), which is projecting 15 percent growth this year compared to Vivint’s projected 13 percent decline in installations.

Shah believes management is likely making the wise decision to abandon unprofitable deals and focus on the lost profitable ones. While this strategy will likely pay off for the company’s bottom line in the long term, it could continue to weigh on market share and installation rates in the near term.

The company plans to ramp its loan mix to 30 percent in the coming quarters.

Even after Wednesday morning’s sell-off, Vivint shares are still up 76 percent in 2017.