Things weren’t going well for investors on Wednesday renewable energy sector. At 11:25 a.m., shares of hydrogen fuel cell companies Bloom Energy (NYSE: BE) and Connect the power (NASDAQ: PLUG) are both significantly lower than the average – 7.3% and 8%, respectively. Elsewhere in the industry, Chinese manufacturer of solar modules JinkoSolar (NYSE: JKS), which erupted earlier in the week, is giving back much of its gains – and is down 12%.
What do these three values have in common, if not that they all largely belong to the “alternative energy” sector? On the one hand, they are “alternatives” to oil stocks – which is a good thing when oil is expensive and producers and consumers are all looking for sources of energy that are not only cleaner but cheaper.
Perhaps the problem today is that oil is do not particularly expensive. In fact, according to the latest data from OilPrice.com, WTI and Brent prices are down more than 3% in Wednesday’s trading, making “alternatives” to oil relatively less attractive.
In the absence of any other very bad news (analyst downgrades, shortfall) affecting this stock group, more competitive oil prices seem to be the likely culprit for this drop in stock prices – higher oil prices. competitive, that is to say … and valuation.
Over the past year, Plug Power shares have risen by almost 450%. Bloom’s stock has climbed 565%, and even JinkoSolar, which operates in the more mature and profitable solar sector, has racked up nearly 500% gains in the past 52 weeks. And yet, the value of the companies underlying these stock market gains remains questionable.
In its more than 20 year history as a public company, Plug Power has never made a single net profit from its business. Bloom Energy hasn’t been around that long (S&P Global Market Intelligence data on this only dates back to 2014), but it has yet to make a profit.
Indeed, even JinkoSolar, which has claimed to be profitable since 2013, has reported negative free cash flow in most years, denying its alleged “profitability”. From 2013 to 2019, Jinko reported GAAP “Profits” of $ 717 million, but its cash flow statement shows that instead of making cash profits, the company burned $ 2.35 billion in lost cash, suggesting extremely low quality of the company’s profits.
Maybe, just maybe, what we’re seeing in today’s sale is that investors are starting to realize that profits matter.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.