Sunedison (SUNE) Stock: Can The Recovery Continue?


Sunedison Inc (NYSE: SUNE)

Sunedison has been an incredibly interesting stock to watch as of late. Over the past several months, the stock has been struggling. However, over the past few trading sessions, we’ve seen incredible gains as the result of a deal with the city of San Diego and the renewal of a deal with Vivint. Now, the big question is: Can SUNE continue with its strong recovery? Today, we’ll talk about the two stories above as well as what we can expect to see from SUNE moving forward.

Sunedison Enters An Agreement With San Diego

Last week, it was announced that Sunedison and the City of San Diego had entered into a 20 year power purchase ageement. Under the terms of the new agreement, SUNE will provide San Diego with 6.6 megawatts of solar panels which will be installed in 25 city owned properties. In a statement, Sam Youneszadeh, SUNE regional manager of the Western US solar business, had the following to say:

Smart cities like San Diego are using solar to save money now, and to hedge against rising utility rates… Sunedison has a proven track record of delivering high quality solar systems to hundreds of city and government customers across the US – we know how to help our customers get the best solution when it comes to saving money with solar.”

While this news was big for SUNE and its investors, another great piece of news has proven to be the main cause of gains…

SUNE Rekindles Its Deal With Vivint

One of the reasons for recent declines has been a canceled deal with Vivint Solar. Essentially, SUNE was expected to acquire the company, but that deal fell through. Nonetheless, last week, it was announced that Sunedison and Vivint have re-negotiated the deal, coming up with a plan that works for both companies. Essentially, SUNE will acquire Vivint; the only difference is they’re getting a cheaper deal. The new deal gives SUNE a $2 per share discount on the cash portion while increasing the stock portion by $0.75. This is the news that really got investors to move SUNE in the bullish direction.

Can The Gains Continue?

Although excitement is definitely driving SUNE up at the moment, I don’t believe that the bullish trend is going to continue much longer. There are two reasons for this:

  1. Energy Sector Blues – First and foremost, SUNE is a player in the energy sector. Unfortunately, even though Sunedison is focused on renewable energy, because the stock is part of the sector it’s widely dependent on the value of oil. At the moment, oil is crashing, leading the energy sector as a whole down the tubes. This doesn’t seem as though it’s likely to come to an end anytime soon. As a result, we can expect to see resistance on SUNE relatively soon.
  2. Market Conditions Don’t Support Continued Growth – Have you looked at the market recently? If you have, you’re seeing a sea of red. Currently, the market is in the midst of rough times. This doesn’t seem like it’s going to come to an end anytime soon. It’s caused by the idea that the Federal Reserve is likely to raise its interest rate this week. When the Fed raises its rate, we know that markets have historically struggled for months following. Considering the fact that the Federal Funds Rate is all but guaranteed to go up, market conditions just don’t support a bullish run that will last much longer.

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]


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