SunEdison Inc (NYSE: SUNE)
SunEdison has been an incredibly interesting stock to follow as of late. After Paris reached a climate change agreement with 195 countries and the US Congress extended a 30% tax credit for renewable energy installations, SUNE climbed in the market. However, more recently, the company has been the point of focus in a lawsuit stating that SUNE misled its investors, leading to declines. Now the big question seems to be will the bulls regain control? In my opinion, the answer is yes! Today, we’ll take a look at the lawsuit causing the declines and discuss why I’m still bullish on SunEdison.
Lawsuit Claims That SUNE Misled Investors
Shortly following the slew of good news hitting the solar sector, we learned of a lawsuit filed by Robbins Arroyo LLP against SunEdison. The class action suit claims that in 2014 and 2015, SunEdison misled investors by issuing several quarterly statements that showed an increase in net sales and explained that the company was poised for growth. The problem the law firm has with these statements is that at the time these statements were made, SUNE was opening massive amounts of debt in order to fulfill acquisition goals. While sales were headed up, acquisition costs caused SUNE to produce a second quarter loss in 2015 in the amount of $263 million. Soon, the company laid off 15% of its employees in a massive restructuring plan designed to cut costs following its acquisitions. Robbins Arroyo LLP claims that these are signs that SUNE did, in fact, mislead its investors. As a result, SUNE has seen short interest climb to an all-time record high and the price of its stock plunge from recent highs.
Why I Believe The Bulls Will Regain Control
There are a few reasons that I’m still relatively bullish when it comes to SUNE:
- SUNE Was Not In The Wrong – First and foremost, SUNE did not mislead investors. The company was seeing increases in sales and revenue during the quarters it announced the positive news. The company has also been very candid with regard to its acquisitions. In fact, investors wanted to see these acquisitions happen. All investors know that acquisitions come with a cost and, in general, are willing to take that loss for the future gains the acquisition will create. With that said, I believe the suit against SUNE Will fizzle in no time flat.
- Growth In Solar Demand – With the landmark Paris climate deal in mind as well as the extended tax credit for consumers and businesses in the United States that install renewable energy systems, it only makes sense that demand for solar and other renewable energy systems will climb. As a result, we’re likely to see big changes in SUNE sales volume, pushing revenue higher. As investors, our ultimate goal is to realize growth. Based on the expected growth in demand for solar systems, SUNE is likely to produce exactly what investors want to see.
- Acquisitions Lead To Strength – As the lawsuit against the company mentions, SUNE has been on a bit of an “Acquisition Binge”. While the suit looks at this as a bad thing, I believe that it’s a good thing. The acquisitions that SunEdison has made have been incredibly important to their future growth, especially considering the Vivint acquisition. All in all, while these purchases may have put short term financial strain on SUNE, they are likely to lead to long term financial strength!
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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