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Why Shares of JinkoSolar Holding Co. Popped 18% in February

By Travis Hoium – Updated Mar 9, 2017 at 8:08AM

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Earnings weren't great, but it was hope for the future that investors were betting on in solar last month.

What happened 

Shares of JinkoSolar Holding Co. (JKS -3.07%) surged 17.9% higher in February, according to data provided by S&P Global Market Intelligence, after the company reported earnings and rode a wave of optimism in the solar industry. 

So what 

Most of the gain in the stock happened mid-month as earnings started to roll out of the solar industry. SunPower said that residential solar demand was strong and there was increasing hope that utility projects would turn the corner later this year. 

Fixed tilt solar farm under a partly cloudy sky.

Image source: Getty Images.

Late in the month, JinkoSolar reported its own earnings and results were mixed. Module shipments rose 7.9% to 1,733 MW in the fourth quarter but revenue declined 3.9% to $737.6 million as panel prices plunged. That also resulted in gross margin falling from 19.2% a year ago to 14.3%, leading to a 66% decline in net income to $21.0 million. 

One positive in the quarter was the repurchase of $61.1 million in senior notes due in 2019, which will help reduce financial risk for the manufacturer. JinkoSolar still has $1.55 billion in debt, but any progress in reducing that number is a positive. 

Now what 

There was a lot of movement in solar stocks last month and in general the market pushed the entire industry higher. But as one of the largest solar manufacturers in the world, JinkoSolar could be a big beneficiary if the solar market recovers nicely in 2018 and beyond. That's why maintaining mid-teen margins and a strong balance sheet will be key throughout 2017, which will have uncertain demand. I wouldn't read too much into a single month's pop because it can be gone in an instant, but if JinkoSolar can keep operations afloat, it could be a big winner in solar long term. 

Travis Hoium owns shares of SunPower. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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