Going after SunEdison’s (NYSE:SUNE) stock? Think again!

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SunEdison (NYSE:SUNE) is quite the best selling solar stock available. It has recently achieved great advancements in finance and technology and has also entered the international market. But not everything is going great, as SunEdison (NYSE:SUNE) has another side and it’s not good. Maybe its stock could fall in a couple of weeks or even days, and the reasons for that might be:

Modular Efficiency:

This measures the system’s ability to convert the sunlight that strikes over its panels. Modular efficiency is as important to the solar industry as fuel efficiency is to the automobile world. SunEdison has not been the best player for modular efficiency, although it has an 18.2% current efficiency, its counterpart Sunpower (NASDAQ:SPWR) has a 21.2% efficiency rate, which is a record for being the highest.

SunEdison (NYSE:SUNE) is trying to be more efficient however. A few weeks ago, it unveiled a new technology called the “Zero white space” which would increase the energy producing capacity by 15% and also would decrease cost by 8%. However the buyers must at least wait around till mid 2015 for this technology to be available in the market.

The size:

Scaling is also really important for a company to reduce its costs. This is the primary reason for Tesla Motors (NASDAQ:TSLA), the electric car producer, to construct its battery Gigafactory. That is why a lot of green energy investors feel secure with stocks of large companies. SunEdison (NYSE:SUNE) wouldn’t actually be classified as small, but it is in third place with $2.1 billion in revenues, falling behind SunPower (NASDAQ:SPWR) with $2.5 billion and First Solar (NASDAQ: FSLR) with $3.3 billion worth of sale.

 

While SunEdison (NYSE:SUNE) has shown quite impressive growth, it has 15 times more debt than its own capital, which makes it the most abusive user of debt than 98% of its counterparts. On the other hand SunPower’s (NASDAQ:SPWR) equity and debt are almost equal, and First Solar’s (NASDAQ: FSLR) debt is just around 4% of its equity. Debts are not always bad but too much of them could make things messy and with rising interest rates it would seem hard for SunEdison to repay them any time soon.

 

Too much Diversity problem:

 

SunEdison’s emergence into the international markets is impressive, but many times new markets have risks attached to them as well. Last month, SunEdison agreed to a project with a Chinese company to generate 1000 MW of solar power in a span of three years. That is beneficial, as it opens a new market but in the past we’ve seen many infamous cases with Chinese investments; and how investments in China have less information for the public which makes it a risky business.

Similarly, a week ago, SunEdison (NYSE:SUNE) entered India, which is one of the fastest growing economies in the world, and signed a MoU with the Indian government to generate 5000 MW of solar energy in the state of Rajasthan. But that carries risk since corruption widely prevails in the country and India’s decentralized government can cause a lot of delays and hindrances.

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