In a March 26 research note, Raymond James analyst Pavel Molchanov reported that ReneSola Ltd. (SOL:NYSE) ended 2020 with a record high level of late-stage projects in the pipeline and currently has more cash on hand than ever.
Molchanov relayed that the Connecticut-headquartered company develops photovoltaic generation assets and sells them to third-party buyers. This business model means capex is low, but revenue can fluctuate significantly from quarter to quarter (QoQ). For instance, Q4/20 revenue, $16.8 million, was 72% higher than Q3/20 revenue. On the other hand, Q4/20 revenue down 37% year over year (YoY) and fell short of guidance of $23–25 million. Gross margin was 13.6%. Adjusted EBITDA was $2.1 million.
Though U.S.-based, ReneSola boasts a large European footprint, "making it one of the most direct ways for investors to get exposure to the European Climate Law," Molchanov noted. The solar energy company's other assets are in the U.S. and China.
"ReneSola's business model and geographic footprint add up to a one-of-a-kind story stock," he added.
Molchanov highlighted that ReneSola's pipeline of late-stage projects was 1,000 megawatts (1,000 MW) at year-end 2020, exceeding the previous high of 783 MW in Q3/18. Project completions during Q4/20 amounted to 828 MW, up QoQ from 800 MW.
ReneSola guided to 2021 revenue of $90–100 million, up 22–35% YoY, and gross margin of 25%, up 200-plus basis points YoY.
The analyst also pointed out the current robustness of ReneSola's balance sheet, which stands at $300 million following the company's largest-ever secondary equity offering in February.
"With this in mind, management clearly has the option to bolster the recurring revenue stream by retaining more generation assets rather than continuing to monetize nearly all newbuilds," wrote Molchanov, adding that the assets ReneSola is most likely to retain this year are those in China.
He concluded that "as with everything in clean tech, the stock's multiples have expanded over the past year, but the scarcity value is real," he added.
Thus, Raymond James has an Outperform rating and a $14.50 per share target price on ReneSola, which is currently trading around $11.43 per share.[NLINSERT]
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Disclosures from Raymond James, Renesola Ltd., March 26, 2021
Analysts Compensation: Research analysts and associates at Raymond James are compensated on a salary and bonus system. Several factors enter into the compensation determination for an analyst, including: i) research quality and overall productivity, including success in rating stocks on an absolute basis and relative to the local exchange composite index and/or sector index; ii) recognition from institutional investors; iii) support effectiveness to the institutional and retail sales forces and traders; iv) commissions generated in stocks under coverage that are attributable to the analyst's efforts; v) net revenues of the overall Equity Capital Markets Group; and vi) comparable compensation levels for research analysts at competing peer firms.
The analyst Pavel Molchanov, primarily responsible for the preparation of this research report, attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers and (2) that no part of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views in this research report. In addition, said analyst(s) has not received compensation from any subject company in the last 12 months.
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