California-based micro-cap solar company Sunworks (NASDAQ:SUNW) is a “hot” topic of discussion (no pun intended) in the lead-up to the November election. Some traders anticipate that former Vice President Joe Biden, if he ends up in the White House, would back the U.S. solar industry and that could give a big boost to SUNW stock.
And indeed, it is true that Biden signaled his intention to spend $2 trillion over a four-year period on clean-energy projects. Moreover, Biden seeks to eliminate the carbon pollution emitted by power plants by the year 2035.
There’s no way to know ahead of time which candidate will win the presidential election. Therefore, I wouldn’t recommend taking a large position in SUNW stock based on the possibility that Biden would spend money on solar projects.
Instead, investors should examine the company itself and especially its financial position. Traders should also consider the possibility of an electric vehicle connection. Is this based on hard data, or mere speculation? Let’s take a closer look and find out.
A Closer Look at SUNW Stock
Even if you read this article and are convinced to buy SUNW stock, please don’t take a huge position in it. This is a volatile asset that makes outsized moves in both directions.
Just take a glance at the historical price action and you’ll see what I’m talking about. SUNW stock rose to $43 in 2011 but crashed to $2 in 2013. Then it surged again, attaining $49 in 2015, only to fall below $1 in 2020.
The SUNW stock price was slightly above $3 in mid-October, so it appears that the bulls are in control at the moment. Still, caution is definitely advised. With a 52-week range of 29 cents to $8.50, SUNW is unpredictable and not for the timid.
It’s also worth noting that SUNW stock has trailing 12-month earnings per share of -$1.346. That’s not an encouraging number, particularly with a stock that trades at $3 and change. However, the company’s recent sales data might convince you to pick up a few shares of SUNW.
Notable Sales Volume
Earlier this month, Sunworks gained a lot of attention after the company provided a highly promising business update.
Specifically, the company disclosed that it had signed $10 million worth of new commercial and agriculture projects during 2020’s third quarter. This represented Sunworks’ best quarterly booking activity since the onset of the novel coronavirus pandemic earlier this year.
Sunworks’ third-quarter sales included 19 existing and new customers. Chuck Cargile, chairman of the board at Sunworks, remained optimistic that his company’s sales momentum would persist:
“The most notable volume of third quarter sales were booked in the last week of September, and we are optimistic this momentum will continue into the fourth quarter as we signed two more large projects in the first week of October.”
Don’t Buy the Rumor
The preceding sales numbers are strongly encouraging and could prompt an informed investors to take a position in SUNW stock. After all, new sales are the lifeblood of a company like Sunworks.
There’s another reason that some folks are piling into SUNW stock. However, it’s based more on rumors than hard facts. And there’s an old saying in the markets. That saying is, “Buy the rumor, sell the news.”
You might recall that another solar company, SPI Energy (NASDAQ:SPI), announced the launch of a electric vehicle subsidiary called EdisonFuture. Electric vehicles are a hot item nowadays. Consequently, SPI stock got a price boost from this announcement.
At around the same time, SUNW stock also got a boost. In all likelihood, speculative traders were hoping that Sunworks would seek an entry point into the electric vehicle market like SPI Energy did.
Yet, there’s no concrete, verifiable evidence that Sunworks is making a move into electric vehicles. With no press release or formal announcement of electric vehicle plans to be found, it appears that to a certain extent, rumors may be driving the price action in SUNW stock.
The Bottom Line
This is a time for cautious optimism when it comes to SUNW stock. There’s no denying that Sunworks’ sales number are improving. That’s backed by verifiable data.
What’s not verifiable is the rumor that Sunworks will pivot to the electric vehicle market. I wouldn’t want to see anyone get burned (again, no pun intended) by speculating on this fascinating solar company.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.