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Why ReneSola Stock Tanked 17.5% in March and Is Headed Even Lower

By Neha Chamaria - Updated Apr 8, 2021 at 2:04PM

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Profit taking hit the solar energy stock, but investors might have missed a recent development.

What happened

ReneSola (SOL 3.62%) shares went on a wild roller-coaster ride in March and eventually ended the month down 17.5%, according to data provided by S&P Global Market Intelligence. That was a dramatic reversal for the solar project developer given its staggering 48% gain in just the second week of March.

Despite an upbeat outlook for 2021 and the future of renewable energy looking brighter than ever, ReneSola shares have continued to fall so far in April as of this writing.

So what

ReneSola kicked off March on a dismal note before an analyst upgrade on March 8 sent the stock flying. Analysts at Raymond James initiated coverage on the solar stock with an "outperform" rating on it.

The euphoria didn't last long, though, as some investors were quick to take profit off the table after the stock's massive run-up in just one week. In fact, it wasn't just ReneSola. Solar energy stocks were hammered across the board after their dream run-up in 2020 and early 2021. The exchange-traded fund Invesco Solar ETF (TAN 2.24%), for example, which owns publicly listed global stocks in the solar industry and more than doubled in 2020, tumbled 9.4% in March. Rising interest rates, recovering oil prices, and premium valuation were some of the factors that triggered a sell-off in clean energy stocks.

A close-up view of solar panels.

Image source: Getty Images.

ReneSola, in fact, had a dizzying rally in the latter half of 2020 through January this year, so profit booking wasn't surprising. The company also missed analysts' estimates when it reported a 36.6% drop in year-over-year revenue for the fourth quarter and a 38% drop in 2020 revenue on March 26.

On the positive side, ReneSola swung to a profit of $3.3 million in 2020 from a loss of $8.8 million in 2019. Moreover, the company issued a strong outlook for 2021, including:

  • Revenue growth range of 22% to 35%.
  • Gross margin of over 25% versus 2020 gross margin of 23.2%.

Now what

One reason ReneSola stock has continued to fall in April is the company's weak outlook for the first quarter -- it expects revenue to fall nearly 12% at the midpoint of its guidance range.

However, investors might have missed an important development: ReneSola has sold solar projects worth 22.3 megawatts this month, which should add to its Q1 cash flows, but the impact of which wasn't included in the company's Q1 guidance.

ReneSola also expects to grow its pipeline to 2 gigawatts this year, which is double its late-stage project pipeline as of Dec. 31, 2020. This comes at a time when President Joe Biden is trying to push a $2 trillion infrastructure bill with intent focus on clean energy, so ReneSola stock could soon find its way back onto investors' radar.

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Stocks Mentioned

ReneSola Ltd Stock Quote
ReneSola Ltd
SOL
$4.86 (3.62%) $0.17
Invesco Exchange-Traded Fund Trust II - Invesco Solar ETF Stock Quote
Invesco Exchange-Traded Fund Trust II - Invesco Solar ETF
TAN
$71.28 (2.24%) $1.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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