The world is gearing up to transition from traditional energy sources to clean and renewable sources seeking a sustainable future and a reduction in global warming. The market for clean energy is estimated to grow at a CAGR of 6.1% between 2017 to 2025.
Seeking to capitalize on the impending revolution, the clean energy space is becoming overcrowded with emerging new players. However, not every renewable energy company is well positioned to reap the potential benefits of this relatively young sector. Certain solar companies are finding it hard to make a profit even after years of operation. These companies are burning through cash quickly and are relying on public investments and debt to sustain their operations.
SPI Energy Company Limited (SPI), VivoPower International (VVPR), and Sunworks, Inc. (SUNW) are three companies that have experienced a decline in revenue over the last few years. And the stocks of these companies have declined steadily over the last few months. It is still uncertain if these companies will be able to turn around their outlook anytime soon, we think, so, it is 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 has operations in China, Japan, Europe, and North America. SPI’s stock has lost 44.6% since hitting its high in September.
The company recently announced that it will be pivoting its business from solar power to electric vehicles. This forthcoming move brings high uncertainty to the company’s outlook since it is untested and inexperienced in the competitive and demanding electric vehicles space.
For the last reported quarter (ended June 30, 2020), the company reported an increase in net sales of 13.3% year-over-year. Its operating income came in at $3.4 million compared to an operating loss of $6.5 million for the same period last year.
The company’s revenue witnessed a three-year CAGR of -9.8% and a five-year CAGR of -5.9%.
SPI’s poor prospects are also apparent in its POWR Ratings, which assigned it a “Sell” rating. It also has a “F” for Trade Grade and Buy & Hold Grade. It is ranked #12 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’s stock has declined some 29% since hitting its high of $24.3 on October 9.
The company’s shares plummeted in October after it brought to market an offering of nearly 22% of its shares outstanding at a deep discount.
For the fiscal year ended June 2020, VVPRreported an after-tax loss of $5.1 million. The company’s loss per share came in at $0.38 during the same period. Also, its restructuring and non-recurring expenses saw an increase of 41.6% versus the previous year.
VVPR’s POWR Ratings are consistent with this bleak outlook. It has an overall rating of “Sell” with an “F” for Trade Grade and Buy & Hold Grade. It is ranked #13 of 19 stocks in the same industry.
Sunworks, Inc. (SUNW)
SUNW is involved in manufacturing, developing, and marketing photovoltaic based power cells. The company’s products are used for residential, commercial, and agricultural purposes. The company’s stock has fallen around 36% since hitting its high of $7 on November 23.
The company recently participated in a failed merger with Peck Company Holdings (PECK). The merger would have provided the capital necessary for the company to clear its orders backlog. SUNW did recently raise $20 million to pay off existing debt, however.
For the quarter ended September 30, 2020, SUNW’s revenue declined 58.3% compared to the same period last year. The company’s gross profit shrank 58.2% during the same period. Its revenue is expected to decline 8.1% for the quarter ended December 31, 2020 and 20.4% in 2020.
SUNW’s poor prospects are also apparent in its POWR Ratings, which assigned 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 shares were trading at $7.96 per share on Friday afternoon, up $0.21 (+2.71%). Year-to-date, SPI has gained 327.96%, versus a 15.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More...
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