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Vivint Solar Earnings Raises Concerns For Several Industry Players

Vivint Solar's results indicate an industry problem as well as a company-specific issue.

The company's earnings may have unjustifiably triggered a collapse in the stock prices of TerraForm Power and SunEdison.

The steep decline in stock prices and the liquidity concerns caused could create an opening for renegotiations or an exit from the merger.

On Monday, Vivint Solar (NYSE:VSLR) released its earnings results. The Company booked approximately 71 MWs of solar systems for the quarter, up 15% year over year, but down from 73MW last quarter. It installed approximately 61 MWs of solar systems, up 24% year over year and down from 66MW last quarter.

Cost per Watt was $3.12, up from $3.00 in the second quarter of 2015, and flat compared to the third quarter of 2014. While this is clearly a negative in an industry with a declining cost curve, it should be expected in the context of growth slowing down. It appears that the Company's installations crews were idled far more than it would like, and the costs were allocated among less-than-planned MWs.

We have been forecasting a growth slowdown for Vivint as well as other players in the residential solar lease/PPA industry. The results are not a complete surprise in the context of adverse developments in the residential solar industry, especially in Arizona and Nevada. However, the Company surprised to the downside and underperformed its leading peers Sunrun (NASDAQ:RUN) and SolarCity (NASDAQ:SCTY) in a big way.

It is unclear if there were some merger-related issues at play here that could account for some of the softness. What is clear, however, is that the Company will likely fall short of its 2015 guidance of 290-310MW. To meet even the low end of the guidance range, Q4 installations have to be around 120MW, which we find...