Why does a firm like Suntech with annual revenue of $3.2 billion have a market cap of $306.25 million?
Why has First Solar’s market cap dropped to $5 billion from more than $10 billion just months ago? First Solar’s stock, trading at $57.90 and down 8.4 percent has not seen its stock price that low since April 2007.
Yesterday, Oct 3, Suntech’s stock dropped 26.41 percent to $1.70, an historic low. What is the market reacting to?
Suntech is the world’s largest producer of solar panels. As of last quarter’s earnings report the China-based firm was on track to meet its full year guidance of 2.2 gigawatts. Total net revenues were $830.7 million in the second quarter of 2011. Revenue guidance for full year 2011 was dialed down $100 million to $3.2 billion to $3.4 billion. Gross margins were a slim 4.1 percent in the second quarter of 2011. The firm’s ASP declined 7 percent quarter-to-quarter and Suntech expects mid- to high-teen price declines in Q3.
But Suntech actually got some positive news this month. Sempra Generation’s massive 700-megawatt Mesquite Solar project has Suntech as the panel supplier for the initial 200-megawatt (DC) phase of the build and the project just received a DOE loan guarantee. When completed in 2013, Mesquite Solar I will be one of the largest photovoltaic solar installations in North America.