Sunedison Inc (NYSE: SUNE)
Sunedison has been a very interesting stock to watch over the past year. In fact, in July, the company was on top of the world with a stock trading above $30 per share. Today, it is trading under $3 thanks to acquisitions and debt. However, the declines we’re seeing on the stock today are simply unwarranted. SUNE is incredibly undervalued! Today, I’ll explain why SUNE fell so far, why the stock is undervalued, and what we can expect to see from the stock moving forward.
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Why Sunedison Fell So Far
In July of last year, when Sunedison was trading at over $30 per share, it was hard to imagine that we would ever be looking at a stock valued under $3. Nonetheless, that has happened, and declines are continuing. In fact, while it’s still pre-market, SUNE is down quite a bit today. Currently (9:16), SUNE is trading at $2.63 per share after a loss of 2.23% so far today. So, what was it that sent the stock down so far? Well, there are a couple of things…
- Acquisitions – The declines started when SUNE started to announce plans of high value acquisitions. While these acquisitions would put Sunedison in a position to take the lion’s share of the solar market, they were also incredibly expensive. This proved to be a big cause for concern among investors.
- Debt – Another big kicker for SUNE is the amount of debt it holds. In order to complete the acquisitions it planned, as well as work to build its massive pipeline of products, Sunedison needed funding. This led to hundreds of millions of dollars in debt. Unfortunately for SUNE, debt is a great way to scare investors.
Why I Believe SUNE Is Going To Climb Long Term
While it is understandable that large acquisitions and massive amounts of debt would cause fear among investors, I believe that this fear is unwarranted. The reality is that when you look into the details, the debt is a relatively small issue, even though the amount is so large. Here’s why I’m so bullish…
- Debt And Assets – As mentioned above, debt is a major concern among Sunedison investors. However, when you compare debt to assets, this concern all but fades away. The reality is that SUNE has an incredible amount of assets. In fact, SUNE has so many valuable assets that if they decided to sell everything today, they would be able to not only pay off their debts, but to pay about $14 per share to investors in the company. Looking at it this way makes the current price of under $3 incredibly appealing!
- Projects Under Way – It’s also important to mention that SUNE is currently working on building several solar fields around the United States. These fields of solar panels are designed to help power entire cities. Of course, customers in these cities will pay less than what they would for nuclear power, but they are still going to pay for the energy; and those payments will be made to SUNE. Therefore, once we get past the infrastructure building phase, SUNE will earn from the energy its solar fields produce, leading to cash positive gains for the company! Think about it this way. Everyone was concerned when Amazon started to invest massive amounts of money into its infrastructure. However, once that infrastructure was built, the stock skyrocketed as the company became profitable. SUNE is headed down that same path!
- Views Of How Energy Is Created – In the past, no one really cared if the energy they consumed was created through the burning of fossil fuels or through renewable energy sources. These days, that has changed. The reality is that global warming is a very big deal, and consumers, businesses, and governments alike are calling for a solution. The only solution to the problem is to work to reduce reliance on fossil fuels, and SUNE products allow for just that. As the shift in tides in the energy industry continues, demand for SUNE products and energy produced in their solar fields will only climb.
What We Can Expect To See Moving Forward
In the short term, it wouldn’t surprise me to see more downward movement or relatively flat movement in the value of SUNE. However, in the long run, I have a very different opinion. In fact, I believe that SUNE is going to climb! With everything mentioned above, it’s hard to imagine that this stock would stay under a valuation of $3 per share forever. Currently, I believe that SUNE is worth between $15 and $16 per share, and when their pipeline of infrastructure is completed, that value is going to grow drastically!
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What Do You Think?
Where do you think SUNE is headed and why? Let us know your opinion in the comments below!
[Image Courtesy of Wikipedia]