Why Yingli Green Energy Hold. Co. Ltd. Shares Plunged Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Yingli Green Energy Hold. Co. Ltd. (NYSE: YGE  ) fell more than 10% early Tuesday, then recovered slightly to close down around 8.5% after the Chinese solar specialist's fourth-quarter results missed Wall Street's expectations. 

So what: Quarterly revenue rose 31% to $613 million, helped by photovoltaic module shipment growth of 11.4% year over year. That translated to an adjusted net loss of $0.31 per American depositary share. Analysts, on average, were looking for a narrower $0.17 per share loss on revenue of $651.55 million.

Yingli also says it's targeting full-year 2014 PV module shipments in the range of 4.0 GW to 4.2 GW, or an impressive increase of 29.4% to 32.6% over fiscal 2013. 

Now what: Even putting aside its fourth-quarter miss, however, Yingli isn't expected to turn a profit this year. It also still needs to dig itself out of its massive $2.5 billion pile of debt. Until Yingli can clean up its balance sheet and prove to investors it has what it takes to eventually churn out a sustainable profit, I think investors would be wise to avoid using the drop as a buying opportunity.

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  • Report this Comment On March 18, 2014, at 7:31 PM, MovingMagic wrote:

    In the Q&A section of the Earnings Call, Yingli management expects turning to profit in Q3 of 2014.

  • Report this Comment On March 18, 2014, at 8:34 PM, TMFSymington wrote:

    ^^ In Q3, yes -- assuming the volume keeps growing and they don't miss expectations again. For the full-year, no.

    I still prefer watching from the sidelines -- perhaps at least another quarter or so -- until they demonstrate more progress. Might miss out on some short-term gains if they're wrong, but the risk of a miss along with Yingli's debt-laden balance sheet are a bit too much for my taste.

    Thanks for reading, and Fool on,

    Steve (TMFSymington)

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