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Why JinkoSolar Holding's Shares Popped 16% Last Month

By Travis Hoium - Mar 6, 2016 at 9:40AM

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Operations are improving at JinkoSolar Holding and that has investors excited today.

Image source: SunEdison.

What: Shares of JinkoSolar Holding Co., Ltd. (JKS 1.22%) jumped 16.1% in February as solar stocks recovered from an early 2016 slumber.

So what: Remember that JinkoSolar, and other Chinese solar stocks, dropped in January as sentiment regarding Chinese companies fell and the ITC extension euphoria wore off. But solar stocks recovered in February and investors started to realize that low oil prices won't dampen the solar market's growth potential long-term.

Investors were also anticipating strong fourth quarter results, released on Tuesday, which didn't fail to impress. Module shipments jumped 59% from a year ago to 1,709.0 megawatts and net income was $53.9 million in the quarter. JinkoSolar has remained one of the most profitable Chinese solar manufacturers, despite falling solar module prices and a highly competitive solar market. This bodes well for the company as shipments steadily grow globally. 

Now what: Volatility still rules the day in solar stocks and VinkoSolar's performance in 2016 shows how up and down the stock can be. But operationally the company is improving and keeping costs low enough to generate a solid return for investors.

My only questions are around the company's technology durability and balance sheet. As competitors start to make better and better modules the margin JinkoSolar has enjoyed may evaporate because it's making a commodity product. The $1.6 billion in debt on the balance sheet is also a concern. Debt has been the downfall of solar companies in the past and it needs to be managed carefully to ensure long-term returns.

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