For speculators looking to chase the hottest megatrends, SPI Energy (NASDAQ:SPI) may look like a surefire winner. But, ignore the press releases, and look at the details, with SPI Energy stock.
What am I talking about? The company, via its recent dabbling into cannabis, crypto, as well as electric vehicles (EVs), is looking to be a “jack of all trades, master of none” situation. That is to say, it’s getting into hot sectors with little experience. Granted, each of these sectors is set to grow massively in the coming decade.
This company’s “throw darts at a board” strategy could pay off. Then again, based on its plethora of red flags, coupled with history of eroding shareholder value, chances aren’t it won’t. That means a potential drop from today’s prices ($8.30 per share), all the way back to around $1 per share.
Granted, continued “green wave” enthusiasm could help support shares. But, given there’s better ways out there to play the solar and EV megatrends, it’s best to skip out on this play.
SPI Energy Stock is Spread Too Thin Across Multiple Megatrends
Until recently, SPI was basically a solar company dabbling in hot markets like crypto and cannabis. But on Sep 23, to say shares went parabolic would be an understatement. As our own David Moadel wrote Oct 20, shares soared to prices as high as $46.67 per share, on news of the company’s entry into the EV business.
Of course, speculators came to their senses (somewhat), and shares sold off from there. Yet, despite the questionable odds its recently formed EdisonFuture unit becomes the next Tesla (NASDAQ:TSLA), SPI Energy stock remains over 800% above prior price levels.
This isn’t the first time SPI has dived into a hot sector. Last year, the company entered the industrial hemp and CBD business, via a partnership with the Navajo Nation. And, before that, the company made a big move into the cryptocurrency space, as our own Josh Enomoto noted earlier this month.
Is this sexy diversification good for SPI Energy? Based on its income statement, perhaps it should put all its eggs in the solar basket, and watch that basket. Burning through cash for years, it’s been dependent on stock sales and convertible debt offerings to keep the lights on.
And, while 2020’s been a great year for even the most speculative of securities, that doesn’t mean this stock can remain a winner for much longer. Looking at its past performance, as well as recent “short report,’ it’s doubtful “this time, it’s different.”
The Bears Have It Right This Time
It’s safe to say this year hasn’t been the most kind to short-sellers. Even the most vocal shorts, with extensive research to back their bear cases, have seen big losses and heavy regret. This activist short-seller called out Plug Power (NASDAQ:PLUG) back in December, when it traded for around $3 per share. Where does PLUG stock trade today? Shares are up five-fold since that bear’s scathing report.
Yet, while I have my own bearish reservations about that company, its red flags pale in comparison to the major concerns with this stock. With this in mind, a recent “short report” from another vocal short-seller may be barking up the right tree.
This month, Grizzly Research (which is short SPI Energy stock), made the case why this company remains a “perpetual pump and dump.” In the full 18-page report, Grizzly provides more than enough rationale to build a bear case.
What are the key takeaways from the report?
Firstly, according to Grizzly, the crpyto units has never been operational, and the hemp/CBD unit is set to be shuttered. Secondly, its EV prospects don’t look all too bright. The company’s Chinese EV partner (Shaanxi Tongjia) suspended operations a year ago. Thirdly, the company is at risk of losing control over its Solar Juice Australia unit, which makes up 82.3% of its revenue.
Granted, as an activist short-seller, it’s in Grizzly’s interest to make the company look as bad as possible. But, this plethora of red flags, combined with the stock’s atrocious performance since 2016 (when it traded as high as $160 per share), should give you pause.
There Are Better ‘Green Wave’ Plays Out There
With its interest in solar, and now EVs, speculators may see opportunity with this recently “too hot to touch” play. But, diving into the details, it’s clear there’s more sizzle than steak here.
Granted, in today’s market, betting against hyped-up stocks isn’t worth the risk. But, if you are looking for “green wave” exposure, skip out on SPI Energy stock, and pursue more solid opportunities elsewhere.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Thomas Niel, contributor to InvestorPlace, has written single stock analysis since 2016.