Sunedison Inc (NYSE: SUNE)
Sunedison has had a bit of a hard time in the market over the past few months, and while the declines are understandable, I believe that they are rooted in fear… not sentiment. Nonetheless, we’re starting to see an incredible recovery in the stock, and now the big question is, “Will the SUNE recovery continue?” Today, we’ll talk about why SUNE had such a rough time over the past few months, what’s changed that is leading to the gains, and whether or not gains are likely to continue. So, let’s get right to it…
Why SUNE Fell So Dramatically
Sunedison started to fall in a big way late last year as the company’s debt started to come to the attention of investors. You see, Sunedison is the largest solar company in the world when you take a look at their assets. However, they got to be this big by acquiring other, smaller solar companies. Those acquisitions were incredibly expensive. So expensive in fact that SUNE quickly worked its way to owing nearly $1 billion to financial institutions. Let’s face it $1 billion is a ton of money to owe, enough to really start causing concerns for investors. Soon, we started to see investor advocate law suits attacking SUNE for building up so much debt and the stock price started to sink like a brick!
Why The Stock Has Turned Around
Since Sunedison started to decline, I’ve maintained an incredibly bullish opinion on the stock. The reality is that there are several factors that heavily outweigh the debt owed. Now, investors didn’t quite realize that until the lawsuits against the company started to fade. Now that there are no more legal battles however, we’re finally back to seeing gains. Here are some of the reasons I’ve maintained such a bullish opinion on SUNE…
- Asset Ownership – As mentioned above, Sunedison is the largest solar company in the world by asset ownership. While the company has nearly a billion dollars in debt, it has far more assets than it does debt. In fact, if SUNE were to sell 100% of its assets, it would be able to pay off all of its debt and still have more than $4 billion left over. That’s enough to give investors $14.50 per share owned… even after paying off debts.
- Power Purchase Agreements – One of the keys to the business model at SUNE is power purchase agreements. The company builds several solar power plants. However, before actually building the plant, they contract the purchase of the power they produce at a set price over the course of 20 years. This guarantees long term profits from each one of its sustainable energy projects and is an absolutely incredible business model.
- Changes In How We See Energy – Over the past few years, we’ve seen big changes in how consumers, governments, and businesses see the creation of energy. The reality is that burning fossil fuels has a horrible affect on our environment. So, the world is working to push for more renewable and clean energy, this will only increase the demand for SUNE products as well as products from other companies in the solar and renewable energy sector.
What We Can Expect To See Moving Forward
While SUNE has been dealt a bit of a heavy hand as of late, the stock is recovering. Personally, I believe that we’re seeing the beginning of a strong recovery that will last for the long term. So, if you want to get involved in a great solar stock, you may want to take a close look at SUNE.
What Do You Think?
Where do you think SUNE is headed moving forward and why? Let us know your opinion in the comments below!
Recent Posts from Modest Money
- Underperformance in Gold Stocks Argues for Interim Peak
- Economic Events Blamed for HSBC's Disappointing Earnings
- Aytu BioScience’s (AYTU) “Natesto” to Target Low Testosterone
- 3 Tips for Flipping Houses
- Humana (NYSE: HUM): What’s Next After the Failed Merger?