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Why Shares of JinkoSolar Holding Co. Plunged 11% Today

By Travis Hoium – May 26, 2017 at 4:27PM

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Two downgrades hit this solar manufacturer ahead of a big earnings report.

What happened

Shares of solar-manufacturing giant JinkoSolar Holding Co. (JKS -0.69%) plunged as much as 11.1% after being downgraded by two analysts. At 3:30 p.m. EDT, shares were still trading down 10.5% on the day.

So what

Analysts at Morgan Stanley downgraded JinkoSolar to underweight and put a $16.40 price target on the stock; they expect margins and revenue to be under pressure as solar-module prices decline. Citigroup also downgraded the stock to a sell rating and put a $15 price target on it, down from a previous target of $15.50.

Solar panels at a large installation on a sunny day

Image source: Getty Images.

These downgrades come ahead of the company reporting earnings on June 5. Competitors have reported gross margins down significantly from a year ago, and are lucky to be at breakeven.

Now what

The problem for JinkoSolar, and other commodity solar competitors, is that manufacturing expansions with newer, less expensive equipment are coming online in the next year, and the products those competitors will make are higher-efficiency than what JinkoSolar currently makes. That'll put further pressure on solar-panel sale prices as well as margins.

I don't think this new discount is a buy sign for the stock; right now I would be wary of JinkoSolar, and all Chinese competitors in solar, given the poor earnings trends.

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

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