Though novel coronavirus-related headlines have dominated 2020, one of the side issues that has taken significant prominence is sustainability. In particular, solar energy, which was already a hot topic, got even hotter. And that’s good news for companies like Sunworks (NASDAQ:SUNW) — and specifically, SUNW stock.
For instance, in 2015, the value of the solar power market worldwide was $86 billion. By 2022, experts predict it will hit $422 billion. That’s a staggering figure, and one that bolsters the fundamental case of Sunworks.
However, it’s possible that the actual revenue generated will be greater than what was forecasted before the pandemic. As you know, 2020 has been bizarre on multiple levels. For California-based Sunworks, its home state suffered rolling blackouts earlier this summer. According to Calmatters.org, the blackouts were the first non-wildfire related ones in 19 years.
Furthermore, the website noted that two main factors contributed to the sudden loss of power: “record-breaking heat throughout the West and fewer available resources because of permanent shutdown of fossil-fuel power plants.” Also, California is heavily reliant on imported power, with a third coming from out of state. Unfortunately, this put California’s electrical grid at a deficit at the worst possible time.
Nevertheless, if you’re going to look at the bright side of things, the rolling blackouts represented free market for green energy solutions. On paper, this helps SUNW stock because it’s bringing people who never considered solar power to start thinking about it.
To be clear, solar panels that are on the grid won’t magically act as backup generators. For that, you’ll need an energy storage solution or have panels that are off the grid. Nevertheless, the interest in solar energy is what matters most to SUNW stock and that’s clearly high — perhaps at an all-time record.
A Biden Win Could Make SUNW Stock Great Again
Although there’s no greater incentive for alternative power solutions than to go for hours, let alone days without power, the vitriolic political struggle could nevertheless have substantial implications for SUNW stock. With former Vice President Joe Biden appealing to the environmental and sustainability crowd, the solar energy industry should get a boost under new White House ownership.
Now, I don’t want to get into a feasibility discussion of the so-called Biden Plan for the environment. Still, if I may, I doubt that the U.S. will achieve a 100% clean energy economy no later than 2050. After all, there are certain advantages of using fossil fuels — most notably energy resource diversification. But the takeaway is that investments like SUNW stock will receive more attention, which is a net positive.
But a more significant development is that Biden and running mate Senator Kamala Harris have pledged to decriminalize marijuana, as well as “automatically expunge all marijuana-use convictions and end incarceration for drug use alone.” That’s a bold move considering that Biden has historically been opposed to legalizing marijuana.
To clarify, decriminalization does not mean legalization, which is an issue that the pair disagree on. However, given the economic impact of the new normal, I’ve got to imagine that Biden will at least entertain the idea. In early 2019, the cannabis industry represented the fastest-growing market, which obviously bodes well for job growth.
And what are we seeing this year? It’s not just the number of people unemployed but rather the startling acceleration of permanent job losers. One of the surefire ways for team Biden to garner immediate support is to legalize weed and nurture this market.
If that happens, this could theoretically boost SUNW stock and its underlying agricultural solar market. While the mechanics regarding solar for cannabis production is complicated due to the myriad ways to grow weed, generally, solar can help cut overhead costs. Furthermore, as solar energy technology improves, the cost-cutting can extend to other areas of marijuana production.
Not Quite a Comfortable Buy Yet
Of course, most of the above assumes a Biden victory. However, if lightning strikes twice and President Donald Trump wins his second term, the situation becomes tricky. And that may help to explain the recent wildness in SUNW stock.
You can never count “The Donald” out, that is for sure.
Also, while the outside narrative for SUNW stock appears bullish, the underlying financials are lacking. For instance, its Altman Z-Score registers as -2, which signifies a deeply distressed organization. As well, Gurufocus.com warns its readers that Sunworks is significantly overvalued.
Because SUNW seems to be looking for some political clarity, I’d prefer waiting until after the election is over before considering shares. Yes, shares have strong tailwinds, but this is also a contested market. As well, the positive fundamentals will take some time to develop.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
More From InvestorPlace
- Why Everyone Is Investing in 5G All WRONG
- Top Stock Picker Reveals His Next 1,000% Winner
- Radical New Battery Could Dismantle Oil Markets
- Revolutionary Tech Behind 5G Rollout Is Being Pioneered By This 1 Company
The post A Biden Victory Could Help Sunworks Stock Over the Long Run appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.