Please ensure Javascript is enabled for purposes of website accessibility

Power Inverters Stuck in the Middle Again

By Travis Hoium - Updated Apr 6, 2017 at 10:09PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Solar developments in Europe have been slower than expected, causing troubles for Satcon Technology.

Power inverters are in a great position in the changing electric generation landscape. Wind and solar plants need them to convert DC power to AC power, making them the lynchpin between power plants and the grid. But sometimes relying on others can come back and bite you in the end.

Right now the uncertainty in European solar subsidies is causing a slowdown in solar installations, particularly in Italy. Until large utility markets like the U.S. pick up the pace, inverter manufacturers like Satcon Technology (Nasdaq: SATC) and Power-One (Nasdaq: PWER) are caught in the middle. They have fast growing businesses, but investors don't know exactly how fast and how profitable they will be quarter to quarter.

That uncertainty causes disappointment -- even when a company reports that revenue jumped 321% from last year, as Satcon did yesterday. Sales of $62.0 million fell below the $62.8 million analysts had expected, and second-quarter expectations didn't help anyone feel better. Uncertainty in Italy has the company seeing revenues between $50 million and $60 million, well below analyst estimates of $73.3 million.

So with the bad news out of the way, where do we go from here? Management thinks sales and margins will pick up as we reach the third and fourth quarters, as solar panels start to be installed in North America. We might be able to read the tea leaves when solar powerhouses First Solar (Nasdaq: FSLR) and SunPower (Nasdaq: SPWRA) report because both have large development backlogs in the U.S. If they're seeing panel sales move from Europe to the U.S., that could be seen as a positive for Satcon, Power-One, and inverter competitor American Superconductor (Nasdaq: AMSC).

By the looks of it, the next quarter will be tough for the entire solar industry. As a result, inverter manufacturers are seeing some uncertainty. I like their position long term, but it'll be a bumpy ride ramping up to their full potential.

Interested in reading more about Satcon Technology? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

First Solar, Inc. Stock Quote
First Solar, Inc.
$70.62 (0.79%) $0.55
American Superconductor Stock Quote
American Superconductor
$5.38 (0.56%) $0.03

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.