Coal-state Democrat Senator Joe Manchin scrapped the Democrats’ pursuit of a scaled-back version of legislative actions against climate change. In a private discussion on Thursday, Senator Manchin stated that he could not support new spending to combat climate change, and on Friday, he clarified his reasoning as untamed inflation.
The $150 billion clean energy plan was expected to support clean energy producers significantly. Moreover, a slimmed-down package of about $375 billion, which the Biden administration expected to help achieve carbon emissions, has to be scrapped now because Manchin prefers a “fuel neutral” approach.
Furthermore, the International Energy Agency (IEA) expects that China’s dominance in the solar energy supply chain is a ‘considerable vulnerability.’ Green energy transition and concentration in China would mean a strained supply in the face of accelerated demand.
Given these developments, fundamentally weak solar stocks Array Technologies, Inc. (ARRY), Polar Power, Inc. (POLA), and Sunnova Energy International Inc. (NOVA) could decline significantly in the upcoming months. So, one might consider shorting these stocks.
Array Technologies, Inc. (ARRY)
ARRY is a solar tracking system and related products manufacturer and supplier. The company’s offerings include DuraTrack HZ v3, a single-axis solar tracking system, and SmarTrack, a machine learning software.
On April 4, ARRY announced that it had agreed to supply nearly 1GW of DuraTrack® HZ v3 for the Gemini solar project, an operational solar + storage site in the U.S. The completion of the project is planned for 2023.
For the fiscal first quarter that ended March 31, ARRY’s gross profit decreased 42.4% year-over-year to $26.59 million. EPS declined 675% from the prior-year quarter to a negative $0.23. Adjusted net income decreased 111.7% from the same period the prior year to a negative $2.96 million.
The consensus EPS estimate of $0.03 for the quarter that ended June 2022 indicates a 57.1% year-over-year decrease.
The stock has declined 20% over the past year and 31% year-to-date to close its last trading session at $10.83.
ARRY’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ARRY has a Stability grade of F and a Value and Quality grade of D. In the 22-stock Solar industry; it is ranked #14. The industry is rated F.
Click here to see the additional POWR Ratings for ARRY (Growth, Momentum, and Sentiment).
Polar Power, Inc. (POLA)
POLA offers direct current (DC) power generators, renewable energy, and cooling systems globally. The company serves customers in the telecommunications, military, commercial, industrial, and marine markets.
POLA’s cash and cash equivalents balance decreased 63.1% year-over-year to $4.19 million in the fiscal first quarter that ended March 31. Total operating expenses increased 9.3% from the prior-year quarter to $2.01 million. Its net loss and net loss per share stood at $1.12 million and $0.10.
Over the past year, the stock has declined 59% and 17.6% year-to-date to close its last trading session at $2.95.
It’s no surprise that POLA has an overall D rating, which translates to Sell in our POWR Ratings system. In addition, it has a D grade for Momentum and Stability. It is ranked #7 in the Solar industry.
Click here to see the additional POLA ratings for Growth, Value, Sentiment, and Quality.
Sunnova Energy International Inc. (NOVA)
NOVA is a residential energy services provider in the United States. The company offers electricity, operations and maintenance, monitoring, repairs and replacements, equipment upgrades, on-site power optimization, and diagnostics services to its customers.
On May 3, NOVA announced its plans to launch an energy plan that would offer its new customers a fixed percentage discount on prevailing utility prices and a 25-year market-based rate, regardless of volatile energy costs.
For the fiscal first quarter that ended March 31, NOVA’s operating loss increased 46.8% year-over-year to $34.21 million. Net loss attributable to stockholders rose 1.8% from the prior-year period to $33.58 million. Adjusted EBITDA declined 1.8% from the prior-year quarter to $12.55 million.
Analysts expect NOVA’s EPS for the fiscal year 2022 to come in at a negative $0.81.
NOVA’s shares have declined 43.3% over the past year and 32.5% year-to-date to close its last trading session at $18.86.
NOVA’s poor prospects are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
NOVA has a Value, Stability, and Quality grade of F and a Sentiment grade of D. It is ranked #16 in the same industry.
In addition to the POWR Ratings grades we’ve stated above, one can see NOVA ratings for Growth and Momentum here.
ARRY shares were trading at $11.25 per share on Monday morning, up $0.42 (+3.88%). Year-to-date, ARRY has declined -28.30%, versus a -17.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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