Growing concerns over environmental issues surrounding fossil fuels have boosted interest in renewable energy and have propelled governments worldwide to adopt sustainable energy policies. For instance, the U.S. is planning to achieve net zero-emissions by 2050, while China plans to hit that level by 2060. Major European countries have also announced plans to achieve carbon neutrality over the next few decades. Moreover, the new Biden Presidential administration would like to invest $2 trillion over the next four years to, among other objectives, build and upgrade solar power plants.
However, in seeking to capitalize on the boom, the clean energy space is becoming overcrowded with new entrants. Many companies are simply riding the bullish sentiment surrounding the industry absent adequate fundamental strength or product pipelines. Many of them are even burning cash and relying on public investments and debt for their operations.
While some observers believe that soaring solar stocks may witness a correction in the near-term, it’s very hard to resist investing in this space considering the exponential returns that they may generate in the long run.
Sunworks, Inc. (SUNW)
SUNW is a premier provider of high performance photovoltaic based solar power systems. The company provides a range of installation services to its solar energy customers, including design, system engineering, procurement, permitting, construction, grid connection, warranty, system monitoring and maintenance.
SUNW signed $10 million in new commercial and agriculture projects in September 2020, comprising 19 existing and new customers and a total of more than 4.4 MW for installation. This demonstrates the continued demand for SUNW’s solar solutions, particularly among agriculture and commercial customers.
In late November, SUNW sold approximately 3.80 million shares of common stock, raising approximately $20 million. It used a portion of the proceeds to repay approximately $2.70 million in outstanding debt to CrowdOut Capital, Inc. The move is expected to bolster the company’s balance sheet by eliminating costly debt and strengthening its working capital position.
Its revenue and gross profit in the three months ended September 30, 2020 were negatively impacted by governmental and customer responses to the COVID-19 pandemic. The response to the pandemic caused utility approval delays and prevented installation activity for many of the larger agriculture and commercial , and public works projects. SUNW’s revenues decreased 58.4% year-over-year to $7.30 million, while its gross profit decreased 58.5% from the year-ago value to $1.25 million.
Analysts expect SUNW’s revenues to decrease 8.1% year-over-year to $13.20 million in the about-to-be reported quarter (ended December 31, 2020). However, a consensus revenue estimate of $13.60 million for the current quarter (ending March 31, 2021) represents a 10% improvement from the year-ago value. SUNW missed the Street’s EPS estimates in three of the trailing four quarters. However, the stock has gained 193.8% year-to-date based solely on investor optimism.
iSun, Inc. (ISUN)
ISUN is a commercial solar engineering, procurement and construction company. The company provides energy services, smart city innovations and clean mobility infrastructure to customers for projects from smart solar mobile phone and electric vehicle charging, up to multi-megawatt renewable energy solutions.
In January, ISUN announced that it has been selected through a competitive bid by the Meriden Housing Authority to provide its innovative solar EV carport, rooftop and ground-mount technologies. The $2.2 million contract for solar EV charging and energy infrastructure will substantially improve ISUN’s organic sales across all business units.
On January 21, The Peck Company Holdings, Inc. announced that it had closed the acquisition of iSun Energy LLC and changed the company’s name to iSun, Inc. The move is expected to be a powerful combination that will differentiate ISUN from other solar or EV charging companies. Furthermore, it will add higher margin products and energy services, which should have a positive impact on its solar EPC margins.
ISUN’s earned revenues decreased 57.7% from the year-ago value to $4.97 million in the third quarter, ended September 30, 2020. Its gross profit has decreased 83.3% year-over-year to $0.24 million, while its EPS declined l 1400% to a negative $013.
The stock has gained 153.1% year-to-date.
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SUNW shares were trading at $14.55 per share on Tuesday afternoon, down $0.49 (-3.26%). Year-to-date, SUNW has gained 184.18%, versus a 4.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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