Shares of China based Jinko Solar Holding Co (JKS) led the solar sector lower on Tuesday and closed down more than 11% to a new 52 week low.
During the middle of the trading session on Tuesday, JKS announced a deal to supply modules to a 5.75MW array of solar panels located on the site of a former landfill in Canton, MA. JKS is in partnership with Boston-based renewable energy project developer Southern Sky Renewable Energy LLC on the deal. However, this deal did little to help JKS stock.
The news that had a greater impact on JKS was a report issued by renewable power consulting firm GTM Research. The report warned of the coming weakness in the solar market as government subsidies begin to wear off. GTM said that it expects panel prices to fall further to 45 cents per watt from the current price of 70-85 cents per watt. This news had a major negative impact across the sector. First Solar (FSLR), Trina Solar (TSL), LDK Solar (LDK), and Renesola (SOL) all closed the session lower.
A major concern for JKS is its debt load. Currently, JKS has $533 million in debt and just $77 million in equity. This is a major problem as JKS has found it difficult to turn a profit because of difficult solar market conditions. If prices do not improve, JKS may find it difficult to meet its obligations.
While the fundamentals are weak, it is dangerous to bet against JKS because the short interest is currently 24% the float. If any positive news comes out about the company, shares will likely make a sharp move higher.
I would avoid JKS as the debt makes the stock too risky. Additionally, I believe the recent weakness in oil prices does not bode well for the solar sector. Solar companies need energy prices higher if they hope to do well over the long-term.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.