SolarCity Downgraded At Barclays On Concerns Over Consumer Credit Quality

SolarCity Corp (NASDAQ: SCTY) has seen its stock collapse more than 56 percent since the start of 2016 and more than 60 percent over the past year.

Despite the ongoing weakness, Jon Windham of Barclays has taken an even more cautious stance towards SolarCity and the entire U.S. residential solar space.

In a report published Monday, Windham downgraded shares of SolarCity to Underweight from Equal-weight with a price target maintained at $20.

Windham justified his downgrade and price target reduction given the likelihood of a Federal Reserve rate hike in September. He noted that higher interest rates are a negative for the home solar space for two reasons: 1) the sensitivity to financing cost in the ABS and tax-equity markets, and 2) the long duration nature of SolarCity's consumer leases portfolio.

Related Link: SolarCity's Team, Scale And Experience Make The Stock A Buy: Baird

Meanwhile, Synchrony Financial (NYSE: SYF) announced on June 14 an increase in its net charge-off rates by 20 to 30 basis points over the next year. Granted, SolarCity's consumer base has an average FICO score of around 750, investors should be concerned on the overall direction of default rates which could put pressure on SolarCity's stock in the near term.

Windham also maintained an Overweight rating on shares of Solaredge Technologies Inc (NASDADQ: SEDG) with a price target slashed to $28 from a previous $35.

The analyst also maintained an Equal-weight rating on shares of Sunrun Inc (NASDAQ: RUN) with an unchanged $7 price target.