The solar industry, having already faced a slew of challenges in recent years, finds itself in a volatile condition this year as well. The persistent hurdles from supply chain issues and polysilicon price fluctuations have muddied the waters.
With the industry in a state of unpredictability, it could be wise to steer clear of struggling solar stocks Sunnova Energy International Inc. (NOVA), Beam Global (BEEM), and VivoPower International PLC (VVPR). Before delving deeper into these stocks, let's first examine the current state of the solar industry.
According to the Solar Market Insight 2022 report by the Solar Energy Industries Association (SEIA) and Wood Mackenzie, the United States added just 20.2 gigawatts (GW) of new solar capacity in 2022, a 16% decline from the prior year. This steep drop was primarily due to an investigation into new anti-circumvention tariffs and equipment detentions by Customs and Border Protection (CBP) under the Uyghur Forced Labor Prevention Act.
The utility-scale solar segment was the most heavily impacted last year, with the segment installations declining 31% year-over-year to 11.8 GW, the sector’s lowest total since before the COVID-19 pandemic. Also, commercial and community solar installations fell by 6% and 16%, respectively.
After a rough year, the solar industry is expected to face significant uncertainty this year amid lingering supply chain disruptions created by the Uyghur Act and the trouble of qualifying for investment tax credit adders under the Inflation Reduction Act.
Furthermore, the rapid fluctuations in material prices exemplify the solar industry's instability. Within the first few weeks of December 2022, polysilicon prices plummeted more than 40%, only to rebound by over 50% in less than a month. According to BOCI Research Ltd., such extreme price volatility results from “extreme inter-segment competition for profits.”
Given the persistent uncertainty in the solar industry, getting rid of struggling solar stocks NOVA, BEEM, and VVPR could be wise.
Let’s take a closer look at the fundamentals of these stocks:
Sunnova Energy International Inc. (NOVA)
NOVA provides a comprehensive energy service package that includes electricity, operations and maintenance, monitoring, repairs, equipment upgrades, on-site power optimization, and diagnostics services. Its residential solar energy system fleet generates around 1,627 megawatts, catering to over 279,000 customers.
NOVA’s trailing-12-month EBITDA margin of 9.07% is 71.5% lower than the 31.82% industry average. Its trailing-12-month net income margin of negative 28.98% compares to the 10.75% industry average. Furthermore, the stock’s trailing-12-month asset turnover ratio of 0.08x is 66% lower than the industry average of 0.24x.
NOVA’s adjusted expenses increased 58.4% year-over-year to $64.60 million in the fourth quarter that ended December 31, 2022. Its operating loss widened by 85.8% from the prior year’s period to $16.85 million. Furthermore, the company’s net loss and loss per share worsened by 98.3% and 38.5% year-over-year to $61.99 million and $0.18, respectively.
Analysts expect the company to report a loss per share of $0.69 for the fiscal year (ending December 2023). Likewise, the company is expected to incur a loss per share of $0.72 for the fiscal year 2024. Also, NOVA failed to surpass the consensus EPS estimates in three of four trailing quarters, which is disappointing.
The stock has slumped 12% over the past year to close the last trading session at $16.55.
NOVA’s weak fundamentals are reflected in its POWR Ratings. It has an overall F rating, translating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an F grade for Value, Stability, and Quality. It is ranked #23 out of 24 stocks within the F-rated Solar industry.
Click here to see the other ratings of NOVA (Growth, Sentiment, and Momentum).
Beam Global (BEEM)
BEEM is a cleantech company that engineers, manufactures, and sells renewably energized infrastructure products for EV charging, energy storage, security, disaster preparedness, and outdoor advertising. Its product portfolio includes EV ARC, Solar Tree DCFC, and EV ARC DCFC, which use solar power and battery storage for EV charging.
The stock’s trailing-12-month gross profit and EBITDA margins of negative 7.58% and 86.95% compare to the industry averages of 29.94% and 13.21%, respectively. Also, BEEM’s trailing-12-month asset turnover ratio of 0.64x is 19.7% lower than the 0.80x industry average.
For the fourth quarter that ended December 31, 2022, BEEM’s cost of revenues rose 124.5% year-over-year to $8.59 million. Its gross loss widened 105% year-over-year to $697 thousand. In addition, the company’s net loss and net loss per share worsened by 287.7% and 250% from the prior year’s quarter to $7.81 million and $0.77, respectively.
Streets expect BEEM to report a loss per share of $1.79 for the fiscal year ending December 2023. Similarly, for the fiscal year ending December 2024, the company’s loss per share is expected to come in at $0.20.
Over the past year, the stock plummeted 50.9% to close the last trading session at $11.18.
BEEM’s bleak outlook is reflected in its overall F rating, equating to a Strong Sell in our POWR Ratings system.
The stock also has an F grade for Stability and Quality and a D for Sentiment. It is ranked last within the Solar industry.
Click here to access BEEM’s rating for Growth, Value, and Momentum.
VivoPower International PLC (VVPR)
VVPR is a sustainable energy solutions company based in London, United Kingdom. The company’s segments include Critical Power Services; Electric Vehicles; Sustainable Energy Solutions; and Solar Development segments.
VVPR’s trailing-12-month gross profit margin of 7.43% is 80.3% lower than the 37.69% industry average. Furthermore, its trailing-12-month ROCE, ROTC, and ROTA of negative 85.14%, 11.33%, and 34.08% compare to the respective industry averages of 8.99%, 3.80%, and 2.50%.
During the six months ended December 31, 2022, VVPR’s revenue from contracts with customers decreased 23.3% year-over-year to $8.73 million, while its gross loss widened 614.1% from the year-ago value to $3.64 million. In addition, the company’s loss for the period worsened by 11.8% year-over-year to $11.22 million.
As of December 31, 2022, VVPR’s total current liabilities were $27.50 million, compared to $22.95 million as of June 30, 2022.
Analysts expect VVPR to report a loss per share of $0.62 for the fiscal year (ending June 2023). The company is expected to incur a loss per share of $0.38 for the fiscal year 2024. Shares of VVPR have plunged 34.4% over the past six months and 71.6% over the past year to close the last trading session at $0.42.
VVPR’s POWR Ratings reflect this poor outlook. The stock has an overall D rating, which equates to a Sell in our proprietary rating system.
VVPR has an F grade for Growth and Quality and a D for Value. Within the same industry, it is ranked #21 out of 24 stocks.
In addition to the POWR Ratings I’ve highlighted, you can see VVPR’s rating for Stability, Momentum, and Sentiment here.
What To Do Next?
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NOVA shares were trading at $16.07 per share on Tuesday afternoon, down $0.48 (-2.90%). Year-to-date, NOVA has declined -10.77%, versus a 8.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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