Outlook Brightens for Solar Energy Provider SolarCity

The energy company's stock value jumped nearly 20 percent.
5:33 | 06/17/14

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Transcript for Outlook Brightens for Solar Energy Provider SolarCity
I'm Michelle Franzen in New York Wall Street calls it a day on Tuesday June 17 this -- story stocks today why the outlook is bright for solar city the nation's largest installer of residential solar panels. Here explain why -- -- toll of Yahoo! finance so Mike what happened to solar city today to put all the spotlight on -- company. We'll solar city had a surprise acquisition announcement today they bought a company called -- label which is a manufacturer. Solar panels -- kind of solar panels that the company installs on homes. And the reason that the markets seem to like this is in up in a way it's a defensive maneuver solar city which of course is -- -- controlled by -- Elon Musk of Tesla fame. They basically have as supply a guaranteed supply of these solar panels. Which the US just slapped tariffs on when they come from -- imported solar -- becoming more expensive people were concerned. Maybe they're not going to be able to actually source what they need and of course you also have the Elon -- factor which is there must be some big grand secret idea behind whatever strategy he undertakes. And he is basically out -- saying we're gonna do our best to basically dramatically reduce the cost of solar energy in this way so the market celebrated at least for one death. Well let's go back to the Iran factor in just a minute but right now let's take a look at -- today's stock chart you can talk us through that -- So a big pop out from the opened this morning when the news -- it was up as much as 18% the stock out for context. This is an eighty dollar stock a few months ago so even with today's move it was down 25%. In the last three months that shows you that concern in part. Over why and how highly speculative kind of futuristic stocks like solar city had been hit in this market also. Those concerns about the Chinese -- of people wondered if it was really gonna hurt the business. And might you know you mentioned it on -- before with PayPal Tesla Motors SpaceX already under his belt get an idea. Of why you think he's moving aggressively into this field again. Well it's interesting because solar city does fit in the mode of the the -- kind of energy solutions for the future or these grand ambitions to totally rework. Our travel infrastructure -- energy infrastructure with those other two companies you mentioned certainly fit in with. I'm interestingly he's been kind of in the background of solar city mostly to this point his cousins as a matter of fact run the company -- day. It was interesting I think for Wall Street because he got on the conference call today he started the call the end of the call. It sort of showed that he was maybe taking a little more hands on approach perhaps. Because the companies -- a little bit of a critical juncture look. This industry is no easy thing to get really profitable in solar it's still subsidize industry depends on people have these. Hot solar panels on their homes getting subsidies and utilities in the government so it does seem as if maybe he's gonna take increased. -- in terms attending to this investment. In May be. That means he's gonna media push -- a little bit harder to increase improve the efficiencies. And certainly pushing it a little bit -- blog today about solar -- acquisition say he is aiming to achieve a quote. Breakthrough in the cost. Of solar power so is this just -- PR statement or do you think you might pull that off. As he has had success in other areas of course including Tesla electric. Sure -- I don't. Think it's intended just as a PR statement certainly intended as an ambition. It's been something many companies are working very hard on I mean it really does seem as if it's sort of holy ground where this industry. But it's very challenging I mean you have these great improvements. In the efficiency. Of solar cells but still the storage capacity is not always what you wanted to be -- -- just not that easy. To converted back to compete with relatively cheap electricity. In every case so I do think he means it. Doesn't mean there's -- guarantee this guy's gonna get -- there's a lot of solar companies out there. I -- -- folks think could be a threat to the overall utility industry and his is just one of them so it's inching to have. These big money and kind of big thinking entrepreneurs. In this industry but again it's it's a tough game it doesn't mean he's gonna make it work. And that tough game of course not just here in the US but also in other places around the world. The solar panel industry is in flux right now a cloud of makers the United States imposing tariffs on Chinese imports is there any risk that solar city act which -- The solar city acquisition and its future. -- is certainly risk involved here mean look they're gonna they're gonna build a plant or manufacture these panels in upstate New York near buffalo. In part because they just want to have a supply but that doesn't mean he can do it in a very profitable way. The glut of of these solar cells. Is significant you have European governments heavily subsidized to manufacture in the purchase of these things whenever you subsidize a product you get more of -- -- you necessarily need. And that's the problem that the people in this industry or are having because it's considered to be. Kind of a public good a public objective. To get more solar. In use and that means the people trying to make money off that aren't gonna nationally have a good time so. It's a gamble I will say not a very expensive one for -- -- -- this is like up to a 315 million dollar acquisition. And that's only if the company meet certain targets so I don't think it's really betting the company on it but there's certainly no guarantee it's -- actually -- Like -- with Yahoo! finance thank you as a -- Even watching story stocks they would abcnews.com. For your latest headlines I'm Michelle Franzen in New York.

This transcript has been automatically generated and may not be 100% accurate.

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