Ascent Solar Technologies - A Fallen Stock That Is Unlikely To Turn Around

| About: Ascent Solar (ASTI)

Summary

The company’s differentiated business strategy in solar energy has still not paid off.

The stock price has continuously declined, losing more than 95% of its value in the last five years.

Capital dilution, debt and losses are major concerns.

Ascent Solar Technologies (NASDAQ:ASTI) is engaged in providing solar and power solutions for consumer electronics, using CIGS PV technology. Since the company deals in a very niche product category and needs time to establish itself as a successful player, it has failed to post profits. Though the company has a competitive advantage in the solar products space due its light weight CIGs technology (as compared to crystalline silicon technology), it has failed to capitalize on this advantage.

Even after ten years the company has failed to commercialize its products, despite the solar market growing at a 50% CAGR during this time. Ascent Solar stock has been battered following continuous dilution of equity capital and consequently losing investor confidence. The stock has lost more than 85% in the last one year. Despite its low price, investing in the stock looks highly risky in my opinion and I would advise investors to stay away from this stock. Though the company has a competitive advantage in the form of its light weight products when compared to silicon based products, it failed to take off in the appropriate time.

Why is ASTI not a buy

a) Past performance has been very disappointing - Though revenues have increased in the last couple of years owing to the sale of EnerPlex products, the bottom line has still not improved.

USD in Million

2010

2011

2012

2013

2014

TTM

Revenue

2

4

1

1

5

7

Cost of Revenue

-

-

-

-

-

6

OPEX

34

109

29

30

39

30

Net Income

-31

-106

-29

-30

-51

-47

Click to enlarge

Data from Morningstar

b) Frequent Capital Dilution - Ascent Solar has time and again resorted to issuing its stock to raise funds, which has resulted in dilution of existing shareholders. I think this has not proved too popular with shareholders, as can be seen from the falling share prices over the years. The outstanding shares stand at 93 million currently. The future looks equally bleak, with the management expecting the cash burn to continue with positive cash flows not expected soon.

Click to enlarge

Source: Google Finance

We do not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until we have fully implemented our new consumer products strategy.

From Company's 10Q

3) Sharp fall in quarterly revenue and revenue guidance for FY 16 was downgraded - Revenue for the Q3'15 was $1.25 million, including $1.17 million from product sales and $0.76 million from government research and development contracts. Total revenues declined ~43% from the previous quarter. Ascent Solar also revised its full year revenue guidance down to $7.2 million from earlier $10 million guidance. This is quite surprising, given that solar industry is growing in leaps and bounds. Even solar products such as chargers, lights etc have become mainstream and have a good market now. The low level of revenues speaks of a business model which needs some serious restructuring in my view.

4) Balance Sheet is not in a good shape - The company's headquarters and manufacturing building in Thornton, Colorado are already held as mortgage to a financial institution. ASTI restructured its balance sheet, which resulted in cash balance of just $0.6 million. As against this the company has total contractual obligations of $12.4 million as of September 2015.

Click to enlarge

From Company's 10Q

Debt is a big issue for the company. Had it not been for the debt balance, the company could have been a decent buyout candidate with just $6 million as its market capitalization value and unique product offering.

Stock Performance & Valuation

Though the stock is trading at a crazily low price of just $0.07, I would still not recommend adding the stock to your portfolio. The stock has lost more than 85% in the last one year. I had recommended selling the stock at $1.27 due to its weak fundamentals and now with the price falling 90% from that point of time, the stock is still not appealing as an investment. The market capitalization value stands at $6 million.

ASTI Upside Risks

a) Innovative consumer products - Ascent Solar deals in battery and solar integrated cases for smart phones. Its Wavesol Mobile modules are lightweight and enable easy integration with a number of consumer products. The technology is thus very suitable for consumer electronics & off-grid applications, defence & military and transportation. Its products are designed to generate power anywhere. Most recently the company launched two new product lines and also announced retail partnership with eBags, an online travel accessory website. Having said that the company suffers acute competition from its peer GoalZero, specializing in portable solar charging devices and power storage systems.

b) Net losses have reduced in the current quarter - The company was successful in bringing down its net losses for Q3'15 to $6 million from $12 million in the prior quarter. However it remains to be seen if ASTI can turn profitable before it runs out of funding.

Conclusion

I think ASTI needs to put more effort towards marketing and selling its products. Ascent Solar deviated from the conventional solar business and diversified into a more specialized consumer products and military space. Despite this differentiated strategy the company has not managed to succeed and has also shut itself from higher revenue opportunities in off-grid and building integrated solar solutions. Solar is a highly competitive business and Ascent Solar operates in a very niche product segment. On top of that it deals with thin film technology which is still not widely accepted by the market. The company has resorted to issuing multiple equity funding rounds for funding its business which is having a negative effect on shareholders. Though the valuation seems cheap, I would advise investors to stay away.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.