Sunedison (NYSE:SUNE) has had an incredibly rough time in the market as of late, and I have to say, their hard times are definitely understandable. However, the declines we've seen on the stock have a lot to do with the way investors and analysts see the company, but how much do we really know about SUNE? Today, we'll talk about why SUNE has been falling, I'll point out a few things that show that fundamentally, this is actually a great investment right now, and we'll talk about what we can expect to see from the stock moving forward.
Why SUNE Is Having A Hard Time
Sunedison's tough time in the market started several months ago when the company's finances came into question. You see, at the time, the company had more than $700 million in debt, and there are few things that scare investors more than overwhelming amounts of debt. As a result of the debt, investors started to shy away from the company, leading to large declines on the stock.
Soon, Sunedison decided to restructure its debt while taking out a bit more. At this point, the company had built debt up that was close to $1 billion, becoming another major cause for concern. While this was going on, SUNE started to talk about big acquisitions that were coming down the line. Of course, these acquisitions would lead to even more debt. However, if they went through, they would open the door to tremendous profitability. So, investors were happy that the company was working on making this move. Unfortunately, once again, things didn't quite go as planned.
This time around, Sunedison was planning on purchasing a large percentage of the company with its yield co, TerraForm (NASDAQ:TERP) purchasing the rest. However, Terraform investors didn't see this as a good move for the company and they did everything they could to block the acquisition. While Terraform investors weren't able to stop the move, the lenders associated with the deal did. When the acquisition of Vivint Solar (NYSE:VSLR) fell apart, SUNE tanked even further.
The Underlying Problem Seems To Be Debt
No matter who you talk to, whether it be an analyst, a broker, or an investor that's bearish on SUNE, you're going to hear about debt. Ultimately, the bearish sentiment on SUNE is rooted in debt. However, is this really a reason to be bearish on the stock?
Here's What No One Seems To Be Talking About
While SUNE bearishness seems to be centered around debt, and that is understandable, it isn't really a reason to be bearish on the stock. You see, when it comes to running a business, it's almost impossible to get massive growth without taking on debt. Even the largest companies in the world have their fair share of debt to pay back. The key when it comes to debt is making sure that you have the assets to back that debt up. When it comes to Sunedison, sure, they have a ton of debt, nearly a billion dollars of it. However, when we talk about SUNE, we're talking about a company that has more than $17 billion in total assets. Not to mention the fact that because of its strong business mode, it's got power purchase agreements with utility companies that guarantee revenue for the next 20 years! All in all, I have no doubt in my mind that SUNE is going to have no problem paying off its debt and thriving.
What I Expect To See Moving Forward
It's clear that bearishness surrounding SUNE is far from over, and that really is a shame. Nonetheless, I'm expecting to see poor activity around the stock for the short term. However, in the long run, I'm expecting to see gains. The truth is that SUNE has built themselves into a position to take full advantage of the change in tides that's coming along in the energy sector, and that will lead to big gains for the company in the long run.