Bad news makes news; good news is no news. That has been the motto for Solar3D (NASDAQ: SLTD) during the past few months. Solar3D has achieved remarkable success within the past few months such as;
- Astonishing Q2 by achieving $11 Million in Revenue (an increase of 47% Year-Over-Year and 94% increase over the previous quarter) along with improved gross margins at 31%.
- Backlog of $22.7 ending Q2.
- Securing multiple contracts that were announced to the public for $8.5 Million.
- Record month for new residential sales in July of $3.9 Million for Solar3D's SUNwork division.
- Acquisition of Elite Solar.
Despite the noteworthy success Solar3D has attained in the past few months, the stock price has yet to respond accordingly. I think we can all agree that the stock price has not responded to the positive news and fell down further is because of the big "F" word, FRESNO.
Fresno is a 2- megawatt solar project with the Fresno/Clovis Wastewater Reclamation facility valued at $10 Million, which was scheduled to be awarded to Solar3D's subsidiary MD Energy on July 30, 2015 subject to City Council Approval. However, the City Council decided to hold an additional hearing on Fresno on August 20, 2015, which was then changed to August 27, 2015 and when August 27th came around, the hearing got pushed to an unknown date as of now.
Jim Nelson, CEO of Solar3D also stated after an additional hearing was required that:
"We look forward to working with the City of Fresno and providing the city management and city council with whatever information they need to make the best decision for the City in moving this process forward."
Due to all the hype and anticipation around Fresno's $10 Million contract, the stock price declined heavily once an additional hearing was requested on July 30, 2015. After that, the stock price surrounded itself primarily on Fresno. No other positive news had any major impact on the stock price. This is why it has been known as the big "F" word. Many individuals are forgetting that this is a City Contract which requires intensive due diligence by the City Council in order for this to actually be awarded.
Many individuals are also unaware that the $10 Million Fresno contract is just an icing on the cake and was never included in 2015's guidance of $40-$45 Million. Despite the contract getting pushed ahead, Solar3D is still on track to achieve $40-$45 Million in Revenue for 2015 as stated in Q2 conference call by Jim Nelson.
ACQUISITION OF ELITE SOLAR
On August 12th, 2015, Solar3D announced that they have signed a definitive agreement to acquire 100% of Elite Solar, a Durham, California-based solar systems provider. Solar3D will pay $7.15 Million for the company, with $2.5 Million to be paid in cash and the $4.65 Million in common stock. The transaction is expected to close on or before November 1, 2015.
Elite Solar is operating profitably and has experienced a breakthrough year. Revenue for 2015 is expected to approach $20 Million, an increase of approximately 140% over the 2014 figure. Elite Solar also expects EBITDA (earnings before interest, taxes, depreciation, and amortization) to be approximately $2.2 Million in 2015.
This purchase is a continuation of Solar3D's aggressive growth-by-acquisition strategy, which is intended to boot the company's top line revenue as well as operating earnings. This purchase will also allow Solar3D to bid on certain jobs that they were not allowed to bid on before.
Solar3D also plans on making four to five acquisitions within the next 16 to 18 months, as stated by Jim Nelson in Q2 conference call. This business model, aggressive growth-by-acquisition strategy, has been very successful for Solar3D so far. If you take a look at Solar3D's last two acquisitions, SUNworks and MD Energy, you could see the significant positive impact they have had on Solar3D's growth.
There have been multiple positive catalysts around this company for the past few weeks which have not been factored into the current stock price but due to Fresno getting delayed, the stock price has been plunging. The stock closed at $3.02 on September 3, 2015, which I believe is a huge steal because this was trading around $4 just before Fresno's delay from on July 30, 2015.
Fresno or no Fresno, Solar3D is still on track for achieving 2015's $40-$45 Million guidance with a new acquisition of Elite Solar and four to five acquisition's coming in the upcoming 16 to 18 months.
Disclosure: I am/we are long SLTD.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.