Shares of ReneSola Ltd. (SOL) have underperformed the overall market substantially year-to-date. The stock has dropped 45%, while the S&P 500 Index has risen by 20%.
There are catalysts, however, which could trigger a significant rebound in the share price. Thus, I am bullish on this stock. (See SOL stock charts on TipRanks)
Headquartered in Stamford, Connecticut, ReneSola develops and builds solar power projects that it sells to its customers of growing photovoltaic markets in the U.S., Europe and China.
From the Q2 Earnings Report
Due to the timing of a project sale, revenue sank 29.3% on a year-over-year basis to $18.53 million in the second quarter of 2021, missing analysts' projections by $2.22 million.
However, the adjusted earnings per American depositary share (ADS) of $0.11 increased 37.5% from the same quarter in 2020, topping the consensus average of $0.05.
Adjusted EBITDA increased by 33% year-over-year to $10 million.
The balance sheet looks robust, as the company has $286 million in cash on hand, while the debt consists of a short-term exposure for just $12 million.
Market Growth Perspectives
The photovoltaic sector will play a crucial role in the ecological transition of the world, because it allows energy for domestic and industrial users without releasing greenhouse has emissions into the atmosphere.
The sector should also benefit from government incentives over time that encourage the installation of solar panels.
ReneSola expects to sell a 12-megawatt project to a Spanish customer before the end of 2021. Several projects in Italy are also scheduled to be completed this year.
These governments redefined their carbon-neutral emissions policy, promoting the use of solar energy and other renewable sources.
Allied Market Research predicts that the solar power industry will be worth $223.6 billion in 2026, a big leap from its value of $52.5 billion in 2018.
The company projects full-year 2021 revenue to be between $90 million to $100 million, compared to the consensus average of $92.17 million, with gross margins expected to exceed 30%.
Wall Street’s Take on ReneSola
In the past three months, three Wall Street analysts issued 12-month price targets for ReneSola. The average SOL price target is $11.35, which implies 62.6% upside.
The analyst rating consensus is a Moderate Buy rating, based on two Buys and one Hold.
Summary
The stock hasn't performed well recently, but this may have created an interesting opportunity in a company with good prospects.
Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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