The world is preparing to switch from traditional sources of energy to clean, renewable sources in search of a sustainable future and a reduction in global warming. The clean energy market is expected to grow at a 6.1% CAGR between 2017 and 2025.
Seeking to capitalize on the impending revolution, the clean energy space is overcrowded with new emerging players. However, not all renewable energy companies are well positioned to reap the potential benefits of this relatively young sector. Some solar companies struggle to make a profit even after years of operation. These companies quickly deplete cash flow and depend on public investment and debt to support their operations.
SPI Energy Company Limited (SPI), VivoPower International (VVPR) and Sunworks, Inc. (SUNW) are three companies that have experienced declining revenues in recent years. And the shares of these companies have fallen steadily over the past few months. It’s still unclear whether these companies will be able to revise their outlook anytime soon, so we believe, so it’s wise to avoid these stocks for now.
SPI Energy Company Limited (SPI)
SPI provides photovoltaic power solutions to government, residential and industrial users. The company is present in China, Japan, Europe and North America. SPI stock has lost 44.6% since reaching its high in September.
The company recently announced that it will be shifting its business from solar power to electric vehicles. This upcoming decision brings great uncertainty to the company’s outlook as it has not been tested and has no experience in the competitive and demanding field of electric vehicles.
For the last reported quarter (ended June 30, 2020), the company announced an increase in net sales of 13.3% year-over-year. Its operating profit was $ 3.4 million compared to an operating loss of $ 6.5 million for the same period last year.
The company’s revenues registered a three-year CAGR of -9.8% and a five-year CAGR of -5.9%.
SPI’s poor outlook is also apparent in its POWR ratings, which gave it a “Sell” rating. It also has an “F” for Trade Grade and Buy & Hold Grade. It is ranked # 12 out of 19 stocks in the solar industry.
VivoPower International (VVPR)
VVPR is involved in the development, manufacture and marketing of small and medium scale solar assets. The company also provides maintenance services for solar assets. VVPR stock has fallen about 29% since it hit its high of $ 24.3 on October 9.
The company’s shares fell in October after it put on the market an offer of nearly 22% of its outstanding shares at a steep discount.
For the fiscal year ended June 2020, VVPR reported an after-tax loss of $ 5.1 million. The loss per share of the company was $ 0.38 during the same period. Also, its restructuring and non-recurring expenses increased by 41.6% compared to the previous year.
VVPR’s POWR ratings are consistent with this grim outlook. It has an overall rating of “Sell” with an “F” for Trade Grade and Buy & Hold Grade. It is ranked 13th out of 19 stocks in the same industry.
Sunworks, Inc. (SUNW)
SUNW is involved in the manufacture, development and marketing of photovoltaic power cells. The company’s products are used for residential, commercial and agricultural purposes. The company’s stock has fallen about 36% since it peaked at $ 7 on November 23.
The company recently participated in a failed merger with Peck Company Holdings (PECK). The merger would have provided the necessary capital for the company to absorb its order book. However, SUNW recently raised $ 20 million to repay existing debt.
For the quarter ended September 30, 2020, SUNW’s revenue decreased 58.3% compared to the same period last year. The company’s gross profit fell 58.2% over the same period. Its revenue is expected to decline by 8.1% for the quarter ended December 31, 2020 and 20.4% in 2020.
SUNW’s poor outlook is also reflected in its POWR ratings, which gave it a “Sell” rating. It also has an “F” for Buy & Hold Grade. It is ranked # 14 out of 19 stocks in the solar industry.
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SPI stock was trading at $ 7.96 per share on Friday afternoon, up $ 0.21 (+ 2.71%). Year-to-date, the SPI has gained 327.96%, compared to a 15.95% increase in the benchmark S&P 500 over the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist who is passionate about providing in-depth information on investing and personal finance. Most recently he has focused on the stock market and specializes in valuing high growth stocks. Following…