Robert W. Baird & Co. Analyst Ben Kallo upgraded SolarCity Corporation (SCTY) when the company issued its first asset-backed security. He thinks SolarCity is likely to issue larger asset-backed securities in 2014.
“It was a small piece of their overall portfolio that backs that asset-backed security, but the rate that came in at 4.8% I think was surprising not only to me but I think to the overall investment community,” Kallo says. “I think that they tested the water with that small asset-backed security and I think in 2014 we’ll see them do a much larger asset-backed security.”
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Kallo says that SolarCity is his top stock pick for 2014, in part because the company is pursuing solar securitization, which he believes is an important strategy that energy efficiency companies can use to lower their cost of capital.
“SolarCity inside of their leasing business [has] the capacity to offer asset-backed securities, which will allow them to raise capital at really the cheapest form of any other type of security,” Kallo says.
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