SunEdison (SUNE): Large-scale solar projects worldwide

By Paul Goodwin, Chief Analyst, Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 7/22/14 Sign up for Cabot Wealth Advisory—it’s free!

My stock pick this week is SunEdison (SUNE), a solar power company that changed its name from MEMC Electronic Materials a few years back to reflect its change in focus from being a pure silicon ingot and wafer manufacturer to a focus on delivering turn-key solar power instalations.

The company has delivered some fairly weak numbers over the last couple of years. SunEdison’s annual revenues declined by 7% in 2012 and 21% in 2013. And earnings-per-share have been negative in four of the last five quarters.

But one look at the stock’s chart will show you that investors have been quite enthusiastic. This is a one-year chart showing SUNE’s progress versus the S&P 500.

What’s been fueling this advance is the success that SunEdison has had in bidding aggressively for large-scale solar projects worldwide. Especially important is the company’s contract to install a 159 kilowatt micro-grid project in India. India has plans to build 20,000 megawatts of solar generating capacity by 2022, and SunEdison’s foot-in-the-door project is a hopeful sign for future business.

In this case, it’s the SunEdison story and chart that are leading the way, with investors betting that the fundamentals (revenue, earnings and valuations) will eventually come into line with projected success in the future.

I’ve always been a fan of solar, myself, but I’ve recognized that it’s useless to expect a wide-scale move toward a power source that’s economically disadvantageous, no matter what the environmental arguments are. Fortunately for everyone, the economics of solar have improved to the point that there is no conflict between profit and environmental advantages. And that’s good news for SunEdison.