The solar industry has witnessed substantial growth over the past decade and is expected to continue to grow amid clean energy initiatives worldwide. Additionally, according to the American Clean Power Association, the Inflation Reduction Act (IRA) passed in August could more than triple clean energy production, which should benefit the solar industry.
Although the industry’s long-term prospects look impressive, its near-term growth trajectory seems challenging as shipping constraints, supply chain bottlenecks, and trade instability continue to constrain this industry. Since the end of 2021, more than 32.4 gigawatts of clean power projects have been delayed, an American Clean Power report said. Moreover, U.S. solar installations were down 53% in the second quarter compared to the same period in 2021.
In addition, rising interest rates amid surging inflation is another significant headwind. Renewable energy projects tend to be sensitive to high-interest rates due to large upfront costs and project lives.
Given the backdrop, we think it could be wise to steer clear of fundamentally weak solar stocks First Solar, Inc. (FSLR), Sunrun Inc. (RUN), and Beam Global (BEEM) now.
First Solar, Inc. (FSLR)
FSLR provides photovoltaic solar energy solutions in the United States and internationally. It serves developers and operators of systems, utilities, independent power producers, commercial and industrial companies, and other system owners. Furthermore, it operates in two segments, Modules and Systems.
FSLR’s operating income decreased 236.3% year-over-year to negative $17.96 million for the second quarter ended July 3, 2022. Net income from continuing operations decreased 147.9% year-over-year to negative $41.71 million, while its adjusted EBITDA declined 32.1% from the prior-year quarter to $15.20 million.
Analysts expect FSLR’s revenue to decrease 10.9% year-over-year to $2.61 billion in the fiscal year 2022. Furthermore, its EPS is expected to remain negative in the ongoing year.
FSLR’s forward P/E multiple of 2,028.84 is 10,113.9% higher than the industry average of 19.86. In terms of its forward EV/Sales, the stock is trading at 4.68x, 87.5% higher than the industry average of 2.49x.
Over the past month, the stock declined 4% to close the last trading session at $129.42.
FSLR’s POWR Ratings reflect its poor prospects. The stock has an overall D grade, which equates to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock is also rated D for Growth, Value, and Stability. It is ranked #8 of 19 stocks in the F-rated Solar industry.
We have also rated FSLR for Momentum, Sentiment, and Quality. Click here to access all FSLR ratings.
Sunrun Inc. (RUN)
RUN designs, develops, installs, sells, owns, and maintains residential solar energy systems in the United States. It also sells solar energy systems and products, such as panels, racking, and generates solar leads for customers. In addition, the company provides battery storage and solar energy systems. RUN’s primary customers are residential homeowners.
During the second quarter ended June 30, 2022, RUN’s total operating expenses increased 36.3% from the year-ago value to $739.89 million. Its loss from operations grew 9.5% from the prior-year quarter to $155.31 million. The company also reported a net loss of $209.76 million and a loss per share of $0.06.
Street expects RUN’s EPS to decline 194% year-over-year in fiscal 2022 to negative $0.69. The stock has declined 42% over the past year and 25.6% year-to-date.
In terms of its forward EV/Sales, RUN is currently trading at 6.63x, 327.1% higher than the industry average of 1.55x. Its forward Price/Sales multiple of 2.50 is 117.2% higher than the industry average of 1.15.
RUN’s POWR Ratings are consistent with this bleak outlook. The stock’s overall F rating translates to a Strong Sell in our proprietary rating system.
RUN has also been graded an F for Stability, Value, and Quality and a D for Growth and Sentiment. Within the same industry, it is ranked #18.
To see the additional POWR Rating for Momentum for RUN, click here.
Beam Global (BEEM)
BEEM, a cleantech company, designs, develops, engineers, manufactures, and sells renewable energy-powered products for outdoor advertising, energy security products, and EV charging infrastructure.
For the second quarter ended June 30, 2022, BEEM’s gross loss and loss from operations grew 19% and 71.4% year-over-year to $326 thousand and $2.82 million, respectively. The company’s net loss surged 70.7% from the year-ago value to $2.80 million, while its loss per share grew 55.6% year-over-year to $0.28.
The consensus EPS estimate of negative $0.24 indicates a 27.6% year-over-year decline for the quarter ended September 2022. Also, its EPS is expected to decline 38.9% year-over-year to negative $1.03 in fiscal 2022. BEEM missed the street EPS estimates in three of the trailing four quarters.
In terms of its forward EV/Sales, BEEM is currently trading at 6.98x, 349.4% higher than the industry average of 1.55x. Its forward Price/Sales multiple of 7.72 is 569.3% higher than the industry average of 1.15.
The stock has slumped 53.9% over the past year and 13.6% over the past month.
It is no surprise that BEEM has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
It also has an F grade for Quality and a D for Growth, Value, Stability, and Sentiment. BEEM is ranked last in the Solar industry.
Click here to see the additional POWR Ratings for Momentum.
FSLR shares were trading at $127.33 per share on Monday morning, down $2.09 (-1.61%). Year-to-date, FSLR has gained 46.09%, versus a -22.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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