Sunedison Inc (NYSE: SUNE)
Sunedison is having a bit of a rough day in the market today following previous downward movement that we’ve seen on the stock. However, a big piece of news came out today that will likely lead to strong movement for SUNE in the long run. The company is going through a big restructuring process at the moment. Today, we’ll talk about the restructuring plans, why I’m still bullish on the stock even after recent declines, and what we can expect to see from SUNE moving forward, both in the short- and long-term view.
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Sunedison Plans On Restructuring
Early today, SUNE provided an update with regard to its strategy and plans on refocusing its Solar Materials operations on asset-light proprietary silicon production technologies. This plan will be achieved via partnerships and joint ventures and is designed to enhance profitability while preserving high efficiency. However, to do so, the company will need to restructure quite a bit. As a result, SUNE will be selling its Kuchig, Malaysia silicon wafer production facility. It also plans on closing the Pasadena, Texas polysilicon production facility and will refocus its Portland, Oregon operations into a cost effective R&D and technology demonstration center. While the restructuring will likely lead to long-run gains, investors are once again concerned with costs of changes. According to SUNE, it is expected that a total of $266 million in non-cash impairment charges and a total of $171 million in other restructuring charges will be reported in the fiscal fourth quarter 2015 results. Nonetheless, the company is confident that they are making the right move here. In a statement, Ahmad R. Chatila, CEO at SUNE had the following to say:
“We are moving forward on several fronts with our asset-light strategy for the upstream solar materials business… We believe our actions to re-engineer this business will maximize the value of our world-leading silicon production technologies, enabling SunEdison’s long term downstream growth and curtailing headwinds caused by trade actions and commoditization of certain products.”
How The Market Reacted To The News
As investors, we’ve come to the realization that any time news comes out with regard to a publicly traded company, we can expect to see movement in the market as a result. In this particular case, the news is relatively positive for the long run, however, in the short term, it creates further costs for a company that is already dealing with a large amount of debt. As a result, SUNE is realizing declines in the market today. Currently (10:40), SUNE is trading at $1.50 per share after a loss of $0.17 per share or 10.18% so far today.
What We Can Expect To See Moving Forward
Moving forward, I have a relatively mixed opinion of what we can expect to see from Sunedison. In all reality, it depends on how far you plan on looking. In the short term, investor fears are likely to drive the stock down further. Unfortunately, SUNE is dealing with a massive amount of debt and investors are concerned. Now with the company spending more money on restructuring, those concerns are likely to grow, leading to further downward movement in the short term. However, in the long run, I have a very bullish opinion of what we can expect. Here’s why.,..
First off, let’s address the debt. There’s absolutely no denying that SUNE is dealing with a massive amount of debt. However, for me, that debt isn’t concerning. The reality is that SUNE has the assets to back up the debts. As mentioned in previous posts, if Sunedison were to sell all of its assets, it would not only be able to pay its debts off, but it would have about $14 per share left over! That’s not too shabby my friends. So, in terms of debt, there’s no reason to be worried.
However, that’s not the only reason I’m bullish on SUNE. The reality is that the company brought the massive amounts of debt on as a result of making changes that would benefit the company in the long run. The reality is that SUNE has been positioning itself to take a lions share of the industry, and that is incredibly appealing to me. Also, considering the change in tides in the energy sector as a whole, the solar industry is likely to climb in a big way. After all, governments around the world have agreed to work to reduce greenhouse gas emissions, which can only be done by reducing reliance on fossil fuels. All in all, things look great for Sunedison and the solar industry as a whole in the long run.
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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!
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