Canadian Solar Shares Plunge as Entire Solar Industry Feels the Burn
Shares of Canada’s largest solar panel maker slumped Monday as its prospects for profitability dimmed amid a supply glut that is casting a shadow over the entire industry.
Canadian Solar Inc.’s latest earnings also come as investors worry about the change in political climate under U.S. president-elect Donald Trump, who has signalled he has limited interest in alternative energy.
“In an era of uncertainty in the two biggest markets for solar, both in the U.S. and China, it can create a fundamental mismatch between supply and demand, which is what we’re going through right now,” said Cowen Group managing director and analyst Jeffrey Osborne.
Guelph-based Canadian Solar, the world’s second-largest solar panel manufacturer, reported revenues of US$657.3 million, below the consensus expectation of US$676.4, according to data compiled by Bloomberg. Earnings per share of $0.242 beat the $0.177 expected by analysts.
That, however, was due to the cost of panel components dropping faster than the price of their products, rather than being able to sell panels at higher prices, said Osborne.
Canadian Solar gave fourth-quarter guidance that said gross margins would be lower, between 11 per cent to 16 per cent, leaving investors spooked about its eroding profitability, said Osborne.
Shares of Canadian Solar were down nearly 9 per cent at US$10.68 on the NASDAQ on Monday.
The state of the solar industry as a whole is also giving investors pause.
I don’t see Trump’s showing up on Jan 20 being the kiss of death for the industry, but it certainly creates an air of uncertainty for investor
First Solar, the largest U.S.-based solar panel maker said last Thursday it planned to slash 1,600 jobs — more than one quarter of its total workforce — and stop production at its only American facility, sending shares down 3.9 per cent to US$31.55, the Canadian Press reported.
SunPower Corp. reported quarterly revenues below expectations earlier this month, and said it would aim to cut costs in response to a low-price environment and sluggish demand next year, according to Reuters. Its chief executive Tom Werner told a post-earnings conference call that its average selling price dropped about 25 per cent in the third-quarter.
On Thursday, Canadian Solar chief executive Shawn Qu told an analyst call the company was working to offset these headwinds yet remained confident in the industry’s long-term prospects.
“Near-term volatility in the stock market does not change the fact that renewable energy sources are just scratching the surface in a single digit of worldwide penetration,” he told analysts.
Still, president-elect Trump, who will be inaugurated in January, has vowed to reverse many of President Barack Obama’s clean energy policies, such as the Clean Power Plan.
However, doing so could threaten the 210,000 American jobs in the solar industry, mostly on the installation side, Osborne said. The bulk of those installations are in Republican states, such as Iowa and Texas, he added.
“I don’t see Trump’s showing up on Jan 20 being the kiss of death for the industry, but it certainly creates an air of uncertainty for investors,” said Osborne.