SunEdison’s Plunge Baffles Analysts Who See Market ‘Disconnect’

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SunEdison Inc. sank the most in almost 14 years after the world’s biggest clean-energy developer reported record growth, leaving analysts scratching their heads.

“We have been receiving a lot of calls on today’s sell-off of SunEdison,” Mahesh Sanganeria at RBC Capital Markets said in a note to clients Thursday. “We expected the stock to react positively.”

Instead, SunEdison plunged 25 percent to $17.08 at the close in New York. That was the biggest decline since September

2001.

Executives said the selloff was triggered by investors focused on SunEdison’s bigger-than-expected loss, when they should be looking at its growth.

The company has been on a buying spree to expand into new markets and feed wind and solar farms to its two power-plant holding companies, TerraForm Power Inc. and TerraForm Global Inc. Julie Blunden, SunEdison’s chief strategy officer, said the market may not recognize the long-term benefit of investing so much revenue in future growth.

“Earnings per share is not a good measure,” Blunden said in a phone interview. “That will come back to the company over many years.”

SunEdison’s net loss swelled more than five-fold in the second quarter to $263 million, or 93 cents a share, from a loss of $41.2 million, or 16 cents, a year earlier, the Maryland Heights, Missouri-based company said in a statement Thursday. Excluding some items, the 74-cent loss exceeded the 51-cent average of 12 analyst’s estimates. Sales rose 5.6 percent to $455 million.

Analysts remain generally upbeat about the company’s prospects, despite expecting losses of as much as $2 billion through 2017. The company has 11 buy ratings, two holds and one sell.

Some are looking at other metrics, such as the 404 megawatts of new capacity installed. That exceeded the 350-megawatt estimate of Jeffrey Osborne, an analyst at Cowen & Co.

“We see the precipitous drop in shares as reflecting a fundamental misunderstanding of the capital mechanics for growth execution,” he wrote in a note to clients Thursday.

SunEdison agreed in July to buy Vivint Solar Inc., the second-largest provider of U.S. residential solar systems. In March, the company bought Solar Grid Storage LLC to add battery system technology, and in January it paid $1.9 billion for First Wind Holdings Inc. It has expanded this year on every continent except Antarctica, announcing its own projects or deals to acquire smaller developers and wind and solar farms.

With the acquisitions, SunEdison expects to double installations next year to 4,200 megawatts to 4,500 megawatts, from 2,100 megawatts to 2,200 megawatts this year.

There’s a “disconnect” between SunEdison’s performance and the share movement, Patrick Jobin, an analyst at Credit Suisse Group AG, said in a note to clients. “The company did exactly what it should do, which is demonstrating their ability to execute on profitable project development.”

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