SolarWindow Technologies (OTCMKTS:WNDW) illustrates the potential, and the potential risk, in the solar sector. The company was sitting on a steady 20% gain for the year at the beginning of November. However, since election day, WNDW stock has charged forward and, is now up over 180% for the year.
SolarWindow is developing what they term LiquidElectricity. If successful, the company will allow its customers to realize the benefits of solar through a transparent coating of organic photovoltaic (PV) solar cells that it applies to glass or plastics.
I’ll give InvestorPlace’s Dana Blankenhorn the credit for distilling SolarWindow’s LiquidElectricity coating application down to an easily understandable insight:
Its (SolarWindow’s) product is a liquid capable of creating an electric charge when applied to glass or plastic. The charge is harvested by a grid of tiny wires, each thinner than a human hair.
And the reason the company’s stock popped so much in November is that it successfully produced its product using roll-to-roll processing. This is the same high-speed production method that is used to commercially manufacture items such as tinted window films and semiconductors.
Smart Money or Speculative Bubble?
It’s fair to say that solar stocks are in a bubble. There are several reasons for investor optimism. The first is that renewable energy is becoming cost-effective. There was always an economic argument for renewables, it just took a back seat to the moral, if not as easy to quantify, environmental argument.
But solar faces a more tangible problem. Specifically, harnessing solar power required installing large solar panels. Not only is this expensive, but for many potential customers it’s an unsightly approach to solar power.
So, imagine if you could be collecting solar power with windows that look like, and are only slightly more expensive than, your home’s current windows. That’s the simplified story for SolarWindow. But the company’s near-term focus is not the single-family home, but the skyscraper.
This makes sense because that’s the audience that will need its products at scale. However, the Covid-19 pandemic is changing the outlook for solar energy. As of June 2020, the industry was employing 34% fewer employees than originally forecast, pushing the workforce to 2014 levels. Furthermore, the United States was only expected to install three gigawatts of solar capacity in the second quarter.
I’ll admit these losses are being felt in the solar panel sector. However, if you’re speculating in WNDW stock it will be wise to understand that the road to profitability may still be bumpy.
Proprietary Technology Drives the Bullish Narrative
If you want to speculate on WNDW stock (and it is speculation at this point), then the bullish arrow in your quiver is that SolarWindow is using proprietary technology. That’s important because SolarWindow faces a crowded field.
There are at least four companies that have their own versions of solar windows, but the fact that none of them operate in the same way as SolarWindow is an important distinction. As an investor that’s the kind of differentiation that can make a difference between a home run and a weak pop-up.
However, it also leads to the most pressing concern is that their proprietary technology is not currently available. In no way am I saying that the company won’t successfully launch its product, only that success is not pre-ordained. However, the company’s recent success with roll-to-roll processing is an important step forward.
Don’t Pay Tomorrow’s Price Today
SolarWindow has a unique, proprietary approach to liquid electricity. I love that. And the company should benefit from an administration that will treat the issue of solar with more than benign neglect. In other words, the company’s moment may be here.
However, the company does not have a product right now to meet that moment. I emphasize the words right now. As an investor you have to decide how long it will take for the company to have a product that it can deliver at a reasonable scale. That could be years away.
Even if you believe that SolarWindow is the future of solar, it’s hard to justify WNDW stock at its current level for a simple reason. When Blankenhorn expressed his optimism for the company in October, the company had a market capitalization of $176 million. In about six weeks (as of this writing) the company’s market cap has nearly tripled. The company’s revenue has too, if you consider that tripling zero is still zero.
And there you have it. SolarWindow has a product that has been 20 years in the making. And it appears that the stars are finally beginning to align. However, without a product at this time, WNDW stock looks a bit overheated. That being said any pullback offers a good opportunity to get into this stock.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.