SunEdison (SUNE) reported a solid fourth quarter result as compared to last year. After a good start in 2014, it continues the growth momentum and rose more than 30% in the last one month. The stock has tripled itself over the year, and looking forward SunEdison seems promising. Let us see a detailed analysis of its future prospects.
Revenue increased 36% to $ 960.7 million from a year ago period. However, sales of semiconductor business manufacturing wafers, which are used in chips for computers, mobile phones and cars, fell 10%. But, SunEdison is focused to benefit its investors in the long run. Consequently, it is planning to spin off its semiconductor business this year so that it can focus on the solar segment. It seems to be a good move, since SunEdison’s solar segment contributes 63% of its revenue.
Looking forward, it anticipates great opportunity in its solar business. And with years of experience it has learned to make big gains in the solar industry. It is focusing on a few concentrated areas to grow, such as high megawatt growth, extracting higher value per watt from solar installations, and strong cash flows to support the transition from building and selling projects to building and operating them.
According to the management, SunEdison had more than 500 megawatts under construction at the end of fourth quarter, and the market sees significant demand for its projects. The company is aggressively developing its solar projects and after completing a 333MW plant, its diversified pipeline increased 270 MW to 3.4 gigawatts, as compared to last year.
SunEdison is counting on new opportunities to optimize retained value per watt. Moreover, it is projecting a run rate of 200MW to 250MW per quarter this year. And the company claims to have found these avenues, which will optimize its value per watt that will ultimately benefit its investors
By the end of fourth quarter, SunEdison had acquired various power projects adding to a total 127 megawatts. Moreover, management’s decision to retain its projects during the quarter added around $160 million to its balance sheet, which otherwise would have been a loss if they were sold in the fourth quarter instead. The company believes that its short term pains will be offset by long term profits.
At the end of 2013 SunEdison has a retained value of $300 million on its balance sheet along with a 1.9 GW worth of projects. These values have more than doubled since last year. This is a good sign for the investors as it represents the pace at which the company is growing. SunEdison is surging ahead in the solar power industry, which seems to be promising as solar power is the second-largest source for U.S.
Also, the company is working hard to improve its balance sheet. It significantly increased its MW completions last quarter. SunEdison also maintained a strong construction rate and still ended the quarter with a higher cash position.
SunEdison plans to spin off its semiconductor business by launching an IPO amounting to $250 million in 2014. Even after the spin-off SunEdison will have partial ownership of the new unit. This spin off will help the company to improve its solar business and focus on the merchant semiconductor silicon wafer market. Also, the spin-off is expected to generate nearly $40 million to $50 million in cash flow, which would assist financing options for solar builders.
Looking forward, management is positive about its prospects. Considering the decisive moves it planning to make, the stock seems to be a sweat buy for investors.