Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Suntech's Suddenly Worth Less

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Hey, I didn't say worthless! But after this round of equity dilution, your shares of Suntech Power (NYSE: STP  ) are suddenly worth less than they were prior to the printing of at least 20 million new shares. If the offering's underwriters exercise their over-allotment option, Suntech will suddenly have nearly 15% more shares outstanding.

Yesterday, I made it quite clear how I feel about the recent tidal wave of equity offerings. I don't think I'm the only unhappy one. The new Suntech shares are priced at $12.50, whereas the stock changed hands in excess of $17 the day before the announcement. Of course, investors also had a rough earnings report to digest.

The main issue was that Suntech whiffed its revenue number, which had been guided to fall in the $340 million to $380 million range. The top line came in light at $316 million instead. Before the last earnings release, Suntech previewed its soft results. For some reason, the firm chose to wait until its full report to break the bad news this time.

I really don't see much else to be disappointed with in the report. While revenue dipped 24% sequentially, that's far better than the declines reported by Solarfun Power (Nasdaq: SOLF  ) or slumping SunPower (Nasdaq: SPWRA  ) (Nasdaq: SPWRB  ) . It's inferior to the result produced by First Solar (Nasdaq: FSLR  ) , but we know that company's in a class of its own.

Margins also fattened up, as promised. The trend there is the same as Solarfun's seeing: raw material costs falling faster than average sales prices (ASPs). Suntech also pointed to "stringent cost controls and a reversal of provision for doubtful debts" in explaining how gross margins came in several percentage points higher than guidance, at nearly 18%.

For me, the sticking point with Suntech continues to be its debt level. With the firm forced to kowtow to its creditors, shareholders risk getting stuck with ongoing share count creep. You can ask an Evergreen Solar (Nasdaq: ESLR  ) owner what that feels like.

Suntech Power is a Rule Breakers recommendation. See if you take a shine to any of our Foolish newsletters with a free 30-day trial.

Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 905577, ~/Articles/ArticleHandler.aspx, 10/26/2016 5:42:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 8 hours ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
STPFQ $0.00 Down +0.00 +0.00%
Suntech Power Hold… CAPS Rating: *
ESLRQ.DL $0.02 Down +0.00 +0.00%
Evergreen Solar, I… CAPS Rating: *
FSLR $40.68 Down -0.19 -0.46%
First Solar CAPS Rating: ***
HQCL $11.81 Down -0.01 -0.08%
Hanwha SolarOne CAPS Rating: *