A Compelling Turnaround Play for a “Total Eclipse” Future

Total Eclipse: How falling costs will secure solar’s dominance in power.”

That’s the title of a January 2021 energy market report from major research firm Wood Mackenzie.

In it, Wood Mackenzie basically outlines a pathway for solar energy costs to fall another 15% to 25% over the next decade, making solar the cheapest energy source in all of the U.S. by 2030.

That’s big news.

Falling costs are the biggest driver of solar energy adoption. Not consumer desire to “save the world.” Not legislature to combat climate change. Not the implementation of storage technologies.

No. Falling costs drive solar adoption.

After all, it wasn’t until the past few years that – on the heels of a 90% drop in solar costs over the last two decades – solar became the cheapest energy source in a handful of European countries and in 16 states in the U.S.

It’s no coincidence that, simultaneous to this happening, solar adoption started to soar in 2019 and 2020.

Consumers didn’t just decide to start caring more about the environment. Governments didn’t implement new legislature. Storage solutions got better throughout 2019 and 2020 – but not that much better.

What did happen?

Solar became the cheapest energy source in a handful of geographies. Shortly thereafter, solar adoption soared.

Now, Wood Mackenzie is saying solar will become the cheapest energy source, everywhere, by 2030.

What will happen thereafter?

Solar will take over the world.

In other words, the solar energy growth narrative is in its first inning – and there’s still a lot of money to be made by investing in this burgeoning industry.

Today, we will show you a compelling way to invest in solar. It’s by buying a small-cap solar stock that is in the midst of a huge, two-pronged turnaround that could unlock tremendous shareholder value in the 2020s.

 

This Small Solar Stock Still Has a Long Runway Ahead

For years and years, ReneSola (NYSE:SOL) was just another commoditized, downstream solar equipment manufacturer in China that simultaneously struggled to grow outside of China or net a profit in the low-margin solar hardware industry.

Then 2020 rolled around.

And ReneSola suddenly turned into a promising, hypergrowth integrated solar player with a global presence and booming margins.

ReneSola stock consequently surged. Over the past year, shares have surged from around a buck, to over $30.

This rally is far from over.

Here’s the story…

ReneSola has historically been a China-first story. Even today, about 80% of the solar company’s 190 MW installed energy capacity is in China.

But, in 2020, ReneSola strategically shifted its focus from “growing in China” to “expanding outside of China.” The company has subsequently landed multiple contract wins in the U.S. and throughout Europe, and built out a project pipeline of over 750 MW of contracted energy capacity outside of China.

Most of that capacity should come online in 2021/22.

Thus, thanks to a strategic shift in focus from China to global, ReneSola is set to increase its installed energy capacity by ~5X over the next 12 months.

More than that, this new capacity gives ReneSola a network to leverage to continue to grow in the U.S. and European solar markets over the next several years.

Thus, in the past 12 months, ReneSola has successfully and significantly expanded its addressable market.

Concurrent to this expansion, ReneSola has pivoted its business model to not just sell and install green energy products – but also sell green energy electricity through that hardware.

This, too, is a big deal, because the sale of electricity carries much higher margins than the sale of solar panels.

The result? Significant margin expansion. In the third quarter of 2020, ReneSola’s gross margins more than tripled year-over-year, from 17% in 3Q19, to 60% in 3Q20.

So… not only has ReneSola significantly expanded its long-term revenue potential over the past 12 months… but the downstream solar installer has also significantly enhanced its long-term profit growth potential.

In other words, ReneSola is now a high-quality, high-margin global downstream solar installer with clear visibility to robust profit growth over the next decade.

Yet, ReneSola is still just a $1.2 billion company – a gross undervaluation relative to high-quality, high-margin downstream solar peers like SunPower.

Connecting the dots, it’s easy to see how this breakout in ReneSola stock could turn into something much, much bigger – which is why if you’re a solar energy bull, you may want to consider taking a position in ReneSola stock today.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

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