Why the Correction Spells Opportunity for Solar Investors (SEDG, JKS, ARRY, SUNW, CSIQ, GSFI)

Solar Stocks

It’s not new – solar stocks take a beating when we run into macro market bearish events that don’t also drive interest rates into the floor.

Monday was another such case – Evergrande, the Chinese property company with over $300 billion in liabilities looks set to default. Markets often struggle toward the end of calendar Q3 and into the beginning of calendar Q4. And this year appears to be no different, with the Evergrande debacle helping to foment the chaos.

But the big question is this: Are we seeing another prime opportunity to buy the solar dip?

While the action so far this week looks sour, we would encourage investors to remember that nothing has changed for the long-term solar growth thesis. China is a big player. And it’s hiccupping right now as it squeezes the excess out of its overcooked property sector. At the same time, rates aren’t falling precipitously despite a stark rise in the VIX. 

Over recent years, when China falls and rates don’t, we typically see solar stocks “turtle”. But history also shows us that those are precisely the opportunities to put new capital allocation to use in the space.

It’s something to keep in mind as this correction unfolds. With that, we take a look at a handful of stocks in the space with some recent interesting catalysts.

JinkoSolar Holding Co., Ltd (NYSE:JKS) bills itself as one of the largest and most innovative solar module manufacturers in the world. JinkoSolar distributes its solar products and sells its solutions and services to a diversified international utility, commercial and residential customer base in China, the United States, Japan, Germany, the United Kingdom, Chile, South Africa, India, Mexico, Brazil, the United Arab Emirates, Italy, Spain, France, Belgium, and other countries and regions.

The company has built a vertically integrated solar product value chain, with an integrated annual capacity of 27 GW for mono wafers, 12 GW for solar cells, and 31 GW for solar modules, as of June 30, 2021.

JinkoSolar Holding Co., Ltd (NYSE:JKS) recently announced its unaudited financial results for the second quarter ended June 30, 2021, including news that quarterly shipments were 5,203 MW (3,976MW for solar modules, 1,227 MW for cells and wafers), total shipments down 2.8% sequentially, and up 16.4% year over year, total revenues were RMB7.93 billion (US$1.23 billion), down 0.2% sequentially and down 6.2% year over year, and gross profit was RMB1.36 billion (US$210.5 million), up 0.1% sequentially and down 10.2% year over year.

Mr. Xiande Li, JinkoSolar’s Chairman of the Board of Directors and Chief Executive Officer, commented, “We are very pleased to have delivered revenue of US$1.23 billion, and gross margin of 17.1%, as well as a significant increase in Non-GAAP net profit quarter-over-quarter, despite very challenging market conditions. As prices along the supply chain remain high, but relatively stable, we see overall acceptance of price increases continuing well into the second half of the year. Demand for modules is gradually resuming, and our module production volume increased remarkably month-over-month in the third quarter.

Even in light of this news, JKS has had a rough past week of trading action, with shares sinking something like -9% in that time. That said, chart support is nearby, and we may be in the process of constructing a nice setup for some movement back the other way.

JinkoSolar Holding Co., Ltd (NYSE:JKS) managed to rope in revenues totaling $1.2B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 3%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($2.2B against $4.9B, respectively).

Green Stream Holdings Inc (OTC US:GSFI) should be seen at this point as a stock left behind, perhaps unjustifiably, by a major market trend. The company is a smaller name in the space. But it has been gaining concrete traction according to a vision that is at once in the thick of the solar theme and at the same time a unique manifestation of that theme.

The company, which recently became current on its filings, is in the midst of launching a fresh vision in the solar space as a community solar play with potentially big implications.

Green Stream Holdings Inc (OTC US:GSFI) most recently announced that its soil boring testing has been completed for its Metropolitan Avenue, Queens, NY project site, allowing the company to proceed to the construction phase for the site’s Solar Farm canopies.

CEO James DiPrima said: “The completion of this step will now allow us to enter into the construction phase on this site… with our other sites quickly following suit.”

According to the company’s release, Structural Engineering Technologies (SET) has two principal officers with over 80 years of combined experience in all facets of structural and foundation Engineering. SET has blended traditional, practical engineering skills with modern technological tools in a single firm that provides efficient and cost-effective solutions for all phases of a project. The company goes on to note that “​SET is not your typical structural engineering firm, but rather a rapidly growing design firm that provides demolition, structural, foundation, geotechnical, civil and environmental, value engineering, and forensic engineering services, as well as engineering support services for owners and contractors, interface with and obtaining approvals from NYC Department of Buildings (Excavation Unit, Concrete Enforcement Unit, Forensic Unit, etc) and NYC Transit Authority.”

Green Stream Holdings Inc (OTC US:GSFI) had previously engaged SET for the Preparation and Submission of Geotechnical Reports, based on Soil Borings, and samples taken by SET’s driller. Report contained all pertinent new building data, brief site history, description of site geology, analysis and description of Soil Borings, and recommended foundation types for proposed new building. Approximately twelve Soil Borings will be made for this site and were to be installed to an anticipated depth of 30 feet below grade. All Borings were installed to their desired anticipated depth, bedrock, or refusal, whichever comes first.

Array Technologies Inc (NASDAQ:ARRY) frames itself as a company that manufactures ground-mounting systems used in solar energy projects. The company sells its products to engineering, procurement and construction firms that build solar energy projects and to large solar developers, independent power producers and utilities, master supply agreements or multi-year procurement contracts.

The company has offices in Europe, Central America, and Australia, and its products include DuraTrack and SmarTrack.

Array Technologies Inc (NASDAQ:ARRY) recently announced it has entered into a multi-year supply arrangement with POSCO, one of the world’s largest steelmakers, to diversify and strengthen its global supply chain. Array will now have access to POSCO’s proprietary PosMAC® material, an alloy coated corrosion resistant steel. POSCO will cooperate with a Korean local fabricator to convert the products into components for use at Array’s global solar project sites. POSCO’s South Korean headquarters will position Array to serve customers in the U.S., Australia, and other emerging solar markets more efficiently with a stable supply.

“The arrangement with POSCO is indicative of our ability to reliably supply our global customer base with the highest quality materials,” said Stuart Bolland, Chief Operations Officer of Array. “This strategic partnership will enable us to reduce trucking mileage to West Coast of the U.S. project sites and ultimately bring greater flexibility and resilience to our supply chain. Further, we are thrilled to offer our customers a superior product in the PosMAC® corrosion resistant technology and partner with a company that shares our commitment to ESG values.”

Even in light of this news, ARRY has had a rough past week of trading action, with shares sinking something like -7% in that time. That said, chart support is nearby, and we may be in the process of constructing a nice setup for some movement back the other way.

Array Technologies Inc (NASDAQ:ARRY) managed to rope in revenues totaling $202.8M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -53.7%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($17.7M against $168.1M, respectively).

Other core tickers in the solar space that could be of interest include Solaredge Technologies Inc (NASDAQ:SEDG), Sunworks Inc (NASDAQ:SUNW), and Canadian Solar Inc. (NASDAQ:CSIQ).

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).

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