New York Stock Exchange (NYSE) delisted Yingli Green Energy’s American Depository Shares (ADS) on Jun 29, which have started trading on the OTC Pink since yesterday with the symbol YGEHY. This marked the exit of yet another Chinese solar stock from the U.S. stock exchange, a trend we have been witnessing for more than a year.
The news did not come as a surprise for investors as this solar panel manufacturer had already revealed such a possibility in February 2017.
What Led to Yingli Green’s Delisting?
NYSE suspended Yingli Green’s trading since it has been unable to meet the minimum required average market capitalization of $50 million over the trailing 30 trading sessions. Also, its stockholders' equity was less than $50 million. Since the company declared that it will not appeal NYSE’s delisting decision, the suspension was made effective immediately.
Notably, once the world’s largest solar panel manufacturer, Yingli Green’s operational performance has not been up to the mark for the past few years. The company has not posted an annual profit since 2010. Unfortunately, its market value, which peaked in 2007 at almost $5 billion, plunged significantly owing to its amassed debt. This is because falling price of solar panels squeezed revenues (according to Bloomberg). Since there are no disclosure requirements for a stock on the OTC Pink index, it may serve as a viable trading place for Yingli Green, with the company lately releasing delayed and unimpressive quarterly results.
Chinese Peers Following Suit
It is imperative to mention that a number of solar stocks, mostly Chinese, have been mulling over exiting the American equity market. Chinese solar panel manufacturer Trina Solar Ltd, which used to trade on the U.S. stock exchange with “TSL” ticker, started this drive of going private. In March 2017, Trina Solar officially became private after completing its merger with Red Viburnum Company Limited — a wholly-owned subsidiary of Fortune Solar Holdings Limited.
In November 2017, JA Solar Holdings, Co., Ltd. JASO — another Chinese solar company — signed a merger agreement. Per the deal, an investor consortium will purchase JA Solar in an all-cash transaction, thereby translating into an equity value of approximately $362.1 million.
Why Chinese Stocks?
Naturally, with Yingli Green out of the U.S. share market, the most inevitable question that arises in one’s mind is that why Chinese solar stocks in particular are phasing out from the U.S. stock exchange. While the reason behind Yingli Green’s delisting has been its stock’s undervaluation, the loss of interest in trading in the United States may be attributed to the trade war tensions between China and America.
The United States’ imposition of a 30% tariff on import of solar panels earlier this year dealt a major blow to trade relations between these two nations on the solar front. Fear of losing customers in the United States, post the imposition of this tariff, may further drive the privatization trend among Chinese stocks in the coming days.
Are Solar Stocks a Safe Bet?
With China being the largest solar market in the world and Chinese solar stocks aggressively exiting the U.S. equity market, investors might become skeptic and think whether it is safe to invest in the solar industry at all. However, there is no need to panic and avoid U.S. solar stocks altogether.
On the contrary, we recommend investors to take a closer look at their investments in China-based solar stocks. This is because, lately, the scenario in the Chinese solar industry is not quite investor friendly. In particular, the situation deteriorated after the Chinese government announced a significant cut in subsidies offered to the nation’s solar projects on Jun 1. This sudden move prompted analysts to reduce their expectations for the nation’s solar industry’s expansion.
No doubt the recent developments should prompt investors to take interest in stocks that are based outside of China, at least in the near term. While the United States remains a market for solar expansion, other booming solar nations like India and Israel, also represent attractive investment options for solar investors.
3 Stocks to Buy
Herein, we have zeroed in on three U.S. solar stocks that investors might want to add to their portfolio. These stocks not only carry a favorable Zacks Rank #1 (Strong Buy) or #2 (Buy) but also boast a solid earnings surprise history. You can see the complete list of today’s Zacks #1 Rank stocks here.
These stocks have rallied year to date, thereby reflecting their innate strength, against the Zacks Solar industry’s decline of 2.2%.
Israel-based SolarEdge Technologies, Inc. SEDG provides innovative solar power harvesting and monitoring solutions for residential, commercial, and utility-scale solar PV installations. It sports a Zacks Rank #1.
The company surpassed the Zacks Consensus Estimate for earnings in the trailing four quarters by an average of 29.11%.
SolarEdge Technologies’ shares have rallied 35.3%.
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India-based Azure Power Global Ltd AZRE is involved in designing, engineering and construction of grid integrated solar installations as well as off grid solar installations. It sports a Zacks Rank #1.
The company surpassed the Zacks Consensus Estimate for earnings in the trailing four quarters by an average of 35.48%.
Azure Power Global’s shares have gained 2.5%.
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California-based Enphase Energy, Inc. ENPH builds a semiconductor-based microinverter system for the solar industry. It carries a Zacks Rank #2.
The company surpassed the Zacks Consensus Estimate for earnings in the trailing four quarters by an average of 44.13%.
Enphase Energy’s shares have skyrocketed 196.3%.
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