What happened

Shares of solar manufacturer Canadian Solar (NASDAQ:CSIQ) plunged as much as 15.6% in trading Wednesday after reporting of third-quarter 2019 results. Shares were still down 15.4% at 2:00 p.m. EST and didn't show any signs of recovery.

So what

Revenue fell from $768.0 million a year ago to $759.9 million and was below the guidance of $780 million to $810 million. Net income fell from $66.5 million a year ago to $58.3 million, or $0.96 per share. On a non-GAAP basis, which pulls out one-time effects, earnings were $0.66, well below the $0.88 that analysts expected.

Large solar farm at sunset.

Image source: Getty Images.

The drop in revenue came despite shipping 2,387 megawatts (MW) of solar panels, which was above guidance of 2,200 MW to 2,300 MW. And margins were even strong at 26.2%, above guidance of 24% to 26%. But revenue didn't meet expectations, and that's a big reason the stock is down today.

Now what

Solar earnings can be lumpy depending on what commodity panel prices are doing and when solar farm sales take place. But this quarter, the concern is that revenue didn't hit expectations despite much-better-than-expected shipments. The sale price of solar panels continues to fall, and as it does, the dollar margin from each sale shrinks unless margins rise (which they did this quarter), making it tough to grow the bottom line.

I think Canadian Solar is still performing well as a solar manufacturer, but not meeting expectations can sink a stock. Taking a step back, shares are now trading for less than 5 times expected earnings in 2019, a steal considering the industry's growth. That's why I see this as a buying opportunity for investors interested in owning one of the few leading manufacturers in solar energy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.