Favorable government policies to encourage transitions to clean energy, declining installation costs and a federal residential solar energy tax credit should drive the growth of the solar industry over the long term. With most Western governments aiming to achieve carbon neutrality by 2035, investors have been betting on the solar industry’s long-term growth. This is evidenced by the Invesco Solar Portfolio ETF’s (TAN) 139.4% returns over the past year, versus SPDR S&P 500 Trust ETF’s (SPY) 38.6% gains.
However, with most economies currently focusing on emerging from a pandemic-led recession, the solar industry is likely to remain subdued in the near term. Challenges related to supply-chain, higher prices for components such as glass, steel and aluminum, and elevated freight costs add to the concerns. Indeed, the global smart solar market is expected to grow only slightly over the next seven years.
Consequently, prominent solar stocks SunPower Corporation (SPWR), JinkoSolar Holding Co., Ltd. (JKS), and VivoPower International PLC (VVPR) are expected to remain under pressure in the near term due to their weak financials. So, they are best avoided now.
SunPower Corporation (SPWR)
SPWR designs, manufactures, and delivers solar panels and systems to residential, commercial, and utility-scale power plant customers worldwide. The company also offers commercial roof, carport, and ground mounted systems, and post-installation operations and maintenance services. In addition, it provides residential leasing program services and sells inverters manufactured by third parties.
In April, SPWR announced projects with Baltimore County to cover two closed landfills with solar systems. These projects are expected to generate upwards of 30 megawatts (MW) of clean energy, thus enabling them to meet Baltimore County sustainability goals and reduce electricity costs.
During its fiscal year 2021 first quarter, ended April 4, SPWR’s non-GAAP revenue decreased 10.5% sequentially to $305.77 million. The company’s non-GAAP gross profit came in at $57.33 million, down 24.7% from the prior quarter. While its non-GAAP net income decreased 65.1% sequentially to $9.26 million, its non-GAAP EPS decreased 64.3% year-over-year to $0.05.
A $327.48 million consensus revenue estimate for the current quarter, ending June 30, represents a 7.2% decline from the prior-year period. The stock’s EPS is expected to fall at a 35.4% rate over the next five years. SPWR lost 39.3% over the past three months to close yesterday’s trading session at $23.19.
SPWR’s poor prospects are also apparent in its POWR Ratings. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a D grade for Growth, Sentiment, Stability and Momentum. We have also graded SPWR for Value and Quality. Click here to access all SPWR’s ratings. SPWR is ranked #15 of 21 stocks in the F-rated Solar industry.
JinkoSolar Holding Co., Ltd. (JKS)
JKS is a China-based company that designs, develops, produces, and markets photovoltaic products and solar system integration services internationally. The company sells its products to distributors, project developers, system integrators, and utility, commercial, and residential customers, as well as on an original equipment manufacturer basis.
On May 31, JKS’ flagship Tiger Pro dual glass module received the world's first IEC TS 62804-1-1:2020 certificate issued by DEKRA, one of the world's largest independent inspection companies. The product cleared all testing and fully demonstrated the module's anti-PID performance, premium quality and high reliability under the most extreme environments.
However, JKS’ financials are not promising. For its fiscal year 2020 fourth quarter, ended December 31 JKS’ total revenues came in at $1.44 billion, which represented a 1.1% year-over-year decline. The company’s gross profit decreased 12.9% year-over-year to $230.94 million. Its income from operations is reported at $71.58 million for the quarter, down 88% from the prior-year period. JKS’ non-GAAP net income decreased 92.3% year-over-year to $33.45 million. Its non-GAAP EPS decreased 92.2% year-over-year to $0.03. And its non-GAAP earnings per ADS decreased 92.4% year-over-year to $0.11.
Analysts expect JKS’ EPS to decline 66.7% year-over-year for the current quarter, ending June 30, to $0.40. JKS has lost 39% over the past six months and 26.2% over the past three months. It closed yesterday's trading session at $39.42.
JKS’ POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to Sell in our POWR Ratings system.
The stock has an F grade for Sentiment, and a D grade for Growth, Stability and Quality. In addition to the POWR Ratings grades we’ve just highlighted, one can see JKS’ ratings for Value and Momentum here. JKS is ranked #10 in the same industry.
VivoPower International PLC (VVPR)
Headquartered in London, VVPR is an international solar and critical power services company that provides critical energy infrastructure generation and distribution solutions to a range of commercial and industrial customers, including the development, construction, and sale of photovoltaic solar projects.
On May 19, VVPR and its Tembo e-LV B.V. subsidiary entered a non-binding agreement with Canadian industrial equipment distributor Acces Industriel Mining Inc., under which Acces will purchase 1,675 Tembo electric light vehicles (e-LVs) through December 2026 and distribute them through its distribution networks in Canada.
However, during the six months ended December 31, 2020, VVPR’s revenue came in at $22.66 million, representing a 27.8% year over year. The company’s gross profit decreased 21% year-over-year to $4.63 million. Its operating loss is reported at $375,000 for the half-year, compared to $4.65 million in operating income in the prior-year period. VVPR’s net loss came in at $382,000, compared to $1.14 million in net income in the year-ago period. Its EPS came in at $0.03 for the period, compared to an EPS of $0.07 in the prior-year period.
For the current fiscal year, ending June 30, 2021, analysts expect VVPR’s revenue to be $41.59 million, which represents a 14.6% year-over-year decline. VVPR has lost 28.2% over the past six months and 26.3% over the past three months. It closed yesterday’s trading session at $7.13.
It’s no surprise that VVPR has an overall F rating, which equates to Strong Sell in our POWR Ratings system.
The stock has an F grade for Quality, and a D grade for Growth, Value, Momentum and Stability. To see additional POWR Ratings for VVPR’s Sentiment, click here. VVPR is ranked #17 in the same industry.
SPWR shares were trading at $23.70 per share on Wednesday afternoon, up $0.51 (+2.20%). Year-to-date, SPWR has declined -7.57%, versus a 12.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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