Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of solar panel manufacturer and project developer Canadian Solar (NASDAQ:CSIQ) jumped 26% today after the company announced a long awaited acquisition.
So what: Solar stocks in general are up big today because oil is up 3%, crossing the $51 per barrel threshold. But what's driving Canadian Solar ahead of the rest of the industry was announcement of the company's $265 million acquisition of Recurrent Energy.
Recurrent Energy was part of Sharp's renewable energy portfolio and will add 4.0 GW of pipeline and 1.0 GW of late-stage projects to Canadian Solar's business. This is business Canadian Solar has put a heavy focus on in an effort to build captive demand for its solar panels.
Now what: For investors, this should be looked at as a strong strategic move and it could pay off quickly if the near-term pipeline indeed leads to $2.3 billion in revenue as management stated today. The only challenge is that we also don't know exactly what kind of margin opportunity there is with even the late-stage projects given the competition for these projects recently. That's my only concern and I'll be watching margins in late 2015 and 2016 to see how this acquisition is paid off.
For today, I'm not a buyer of the stock given the massive pop, but I think this was a strong move to further vertically integrate and if the stock comes down in coming weeks it would be a good buying opportunity for a leader in the solar industry.