As the world continues to assess and address the consequences of climate change, governments around the world are starting to take serious action to meet emission reduction targets. Renewable energy stocks dominated the market last year with increased awareness of their potential to drive change towards a sustainable energy future. Optimism in renewable energy is expected to continue this year and beyond thanks to favorable policies undertaken by governments around the world.
The push towards green electricity grids is expected to be a key performance driver for companies in the solar energy sector. The United States Energy Information Administration (EIA) predicts that 15 GW of solar photovoltaic (PV) generation capacity in the electric power sector will be added in 2021, with an additional forecast of 12 GW for 2022. And partly because the cost of storing solar energy has fallen dramatically in recent years, investors have grown increasingly interested in the sector. Evidenced by Invesco Solar ETF (TAN) 242% returns over the past year.
While several companies are now engaged in the field of solar energy, many are still not profitable. Stocks of most companies in the solar energy sector are currently trading at high valuations, but those with weak finances may well experience a short-term pullback despite the industry’s overall healthy outlook. We believe that Sunrun Inc. (RUN), SunPower Corporation (SPWR) and Sunworks Inc. (SUNW) are three stocks that may see corrections in the short term and may not rebound quickly. It is therefore wise to avoid these stocks for now.
Sunrun Inc. (CLASSES)
Based in San Francisco, RUN pioneered residential solar service. The company is engaged in the design, development, installation, sale, ownership and maintenance of residential solar energy systems in the United States With more than 500,000 customers, RUN markets and sells its products through a direct to consumer online, retail, mass media, digital media, door-to-door sales, field marketing and referral channels, as well as through its network of partners.
RUN is expected to release its fourth quarter 2020 earnings report after market closes on February 25. For the third quarter (ended September 30, 2020), RUN’s revenue decreased 2.7% year-on-year to $ 209.76 million. Its revenue from customer agreements and incentives increased slightly year-over-year, but its revenue from solar power systems and product sales declined by more than 20% year-on-year. other. The company’s net income increased 29.2% year-over-year to $ 37.45 million, on EPS of $ 0.28.
Analysts expect the company’s revenue to increase 58.3% for the quarter ending March 31, 2021 and 55.5% in fiscal 2021. However, the history of unexpected earnings of RUN is not impressive; the company has missed consensus EPS estimates in three of the past four quarters. In addition, its EPS is expected to decline by 57.1% for the fiscal year ended in 2020.
On January 26, RUN listed $ 350 million of 0% convertible senior notes, due 2026, in a private placement with qualified institutional buyers. In November, the company contracted with one of the largest US electric utilities, Southern California Edison (SCE), to increase grid resiliency and reduce electricity costs. Despite these developments, RUN stock has only gained 8.7% so far this year, to close yesterday’s trading session at $ 75.40. Additionally, the stock lost 21.9% in the past month.
RUN’s POWR ratings are consistent with this grim outlook. The stock has an overall rating of F, which equates to a strong sell in our proprietary rating system. POWR scores are calculated by considering 118 different factors, each factor being weighted to an optimal degree.
RUN also has an F rating for value and quality. In total, we rate RUN on eight different levels. Beyond what I stated above, RUN is also given ratings for Growth, Momentum, Stability, and Sentiment. Get all RUN ratings here.
RUN is currently ranked # 17 in the solar industry at 17 stocks.
SunPower Corporation (SPWR)
Supplier of storage and distributed production energy services, SPWR offers solar + storage solutions. Based in San Jose, California, SPWR has offices in North America, Europe, Australia, Africa and Asia. It designs all-in-one residential and commercial solutions backed by personalized customer service and the most comprehensive warranty in the industry.
SPWR is expected to release its fourth quarter and full year 2020 financial results on February 17. The company’s total revenue decreased 3.9% year-over-year to $ 274.81 million for the third quarter ended September 27, 2020. Its revenue was from solar power systems , components and other segments decreased 3.5% year-on-year, and its residential rental revenue decreased 63.6% year-on-year to $ 1.28 million. And although its net profit increased 130.3% sequentially to $ 44.63 million, its gross margin declined 18.4% year-on-year to $ 37.14 million.
Analysts expect the company’s revenue to decline 41.4% for the quarter about to be released (ended December 31, 2020) and 27.6% for the quarter ending on March 31, 2021. In addition, SPWR’s EPS is expected to decline by 41.4% for the closed fiscal year 2020. December 31, 2020 and at the rate of 35.4% per year over the next five years. The stock gained 54.8% over the past month to close yesterday’s trading session at $ 45.35. However, the stock is expected to hit $ 24.12 soon and has a potential downside of 44.6%.
SPWR launched its new mySunPower app on February 3, which is expected to be available for download on February 16 from the Apple App Store. The app is designed to help homeowners review and manage their settings for power generation, consumption, and battery storage from a mobile device.
Last month, SPWR announced plans to launch SunPower Residential Installation (SPRI) in seven new markets in six states by the end of the second quarter of 2021. However, in early January, SPWR announced the shutdown of SunPower Manufacturing Oregon, LLC. , its solar panel manufacturing plant in Hillsboro, Oregon.
SPWR’s poor outlook is evident in its POWR assessments. The stock has an overall rating of D, which is equivalent to Sell in our proprietary rating system. SPWR has a rating of F for stability and D for value, feeling and quality.
Click here to view additional POWR ratings for SPWR (Growth and Momentum).
The stock is ranked # 12 in the same industry.
Sunworks Inc. (SUNW)
SUNW has been in business for over three decades and is a leading supplier of high performance solar power systems. The company supplies photovoltaic (PV) power systems for the residential, commercial and agricultural markets in California and Nevada. The company’s business facilities include office buildings, manufacturing plants, warehouses, and agricultural facilities, such as farms, wineries, and dairies.
SUNW’s total revenue decreased 58.4% year-on-year to $ 7.30 million for the third quarter ended September 30, 2020. The company’s gross profit also decreased 58.2% in year on year to reach $ 1.25 million. He reported a net loss of $ 2.85 million and a loss per share of $ 0.17. Analysts expect the company’s revenue to decline 8.1% for the quarter ended December 31, 2020. Its EPS is expected to grow at a rate of just 10% per year over the next five years. . Additionally, the company missed Street’s EPS estimates in the next four quarters.
In January, SUNW appointed Gaylon Morris as new CEO. However, on November 12, the company announced that its proposed merger with The Peck Company Holdings, Inc. (PECK) had failed to gain shareholder approval. Possible breaches of the company’s fiduciary duties and other violations of law related to the proposed merger were investigated by Rigrodsky & Long, PA
Over the past year, SUNW stock rose 2,224.4% to close yesterday’s trading session at $ 20.92. However, the stock is currently trading 28.8% below its 52-week high of $ 29.37, which it hit on January 25. Additionally, the stock is expected to reach $ 0.8 in the near term, indicating a potential downside of 96.2%.
It’s no surprise that SUNW has an overall rating of D, which equates to Sell in our POWR rating system. The stock has an F rating for value and stability and D for sentiment.
We have also awarded SUNW ratings for growth, momentum and quality. Get all SUNW ratings here.
The stock is ranked # 11 in the same industry.
POWR scores are calculated by considering 118 different factors, each factor being weighted to an optimal degree.
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RUN stock was trading at $ 77.10 per share on Tuesday afternoon, up $ 1.70 (+ 2.25%). Year-to-date, RUN has gained 11.13%, compared to 4.38% for the benchmark S&P 500 during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in economics at university and has a passion for writing, which led to his career as a research analyst. Following…