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Nicholas Kitonyi
Nicholas Kitonyi
Articles  | Author's Website |

Can Atlantica Yield Find Another Leg Up?

Stock price performance has been underwhelming since 2015

December 14, 2017 | About:

The renewable energy market has been gaining staunch supporters over the last few years as the world continues to embrace the fact that climate change could have serious repercussions in the foreseeable future. And to answer the silent call, startups in the renewable energy market have cropped up in recent years as they seek to disrupt the energy sector.

Atlantica Yield (NASDAQ:AY) is a renewable energy startup founded in 2013 that has emerged as one of the most interesting players in this new and exciting space. The company owns several renewable energy generation assets spread mainly between solar and wind technologies. It also owns electricity transmission and water assets to augment operations in its power generation units.

The company went public in June 2014, offering its stock to investors at an IPO price of $29 per share for a total value of $720.65 million for the 24.85 million shares offered to the public. Its performance as a public company was volatile for the first 12 months, instantly rising to well above $40 per share before dropping to $25 per share within six months of going public. The stock price then rebounded in the following seven months to $38 per share in July 2015.

However, that rally was short-lived, as the company’s stock dropped to below $20 by October of that year as shown on the chart below.

Since then, Atlantica has failed to rebound closer to its historical highs, with the highest price of about $23 per share reached in November this year. Generally, the performance has been subdued since the start of last year, which also partially mirrors the trend demonstrated by Atlantic’s revenue and net income. Looking at the company’s revenue, net income and the stock price, it appears that investors have sensed a stagnation with little or no growth expected in the near-term horizon.

On a trailing 12-month basis, the revenues have barely changed since July last year, hovering just below the $1 billion mark. And in a similar fashion, its net income rebounded in September 2016 to about $28 million TTM and has barely changed since then.

Can Atlantica find another leg up after a period of subdued performance? The answer might be within rather than without. This is because, on a global scale, the opportunity for renewable energy players is growing by the day. Most governments have now put measures in place that require residential and even commercial building developers to adopt the usage of renewable energy sources in their power supply plans.

For instance, most new residential properties in the emerging markets are required to have solar powered water heating systems while others are implementing the use of ground heat pumps to achieve the same objective. The move to implement these technologies is not only beneficial to the environment as they cut carbon dioxide emissions, but also help residents and small businesses to reduce their energy consumption bills, reported Ground Sun.

Research reports also indicate that there is an increasing adoption of Offshore Wind Power, while several countries are setting up projections for mass harvesting of solar energy. Therefore, the problem is not the market, but rather, it appears that Atlantica needs to work on its competitive edge against rivals, and especially privately held startups.

Conclusion

In summary, Atlantica Yield operates in an exciting industry. However, this industry is too open for more rivals to come in and this is proving to be a major obstacle in the company’s growth story. Its revenues and income have stagnated for the better part of the last two years and unless something fundamentally changes, this could continue to the foreseeable future.

Disclosure: I have no position in any stock mentioned in this article.

About the author:

Nicholas Kitonyi
Nicholas the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on research sites like Seeking Alpha and Benzinga.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. As a trader, Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

Visit Nicholas Kitonyi's Website


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