Why Renewable Energy Stocks Fell Sharply in June

June wasn’t kind to the renewable energy industry, as investors were wary of how risky some of the industry’s smaller companies could be. The bankruptcy of electric vehicle (EV) stock Fisker meant that other renewable energy companies could eventually go under, too.

According to data provided by S&P Global Market Intelligence, SunPower Company (NASDAQ: SPWR) The company’s shares fell 11.4% in June and continued to fall in July, losing 29.7% in its first week of trading. Flashing charging (NASDAQ:BLNK) fell by 11.9% last month, and Bloom’s Energy (NYSE:BE) dropped by 25%.

SunPower news keeps getting worse

2024 Was All Bad News for SunPower, The Company Needed a Bailout from Its Majority Owner Total Energies and stated that it would be necessary to re-submit financial statements in two years.

In early June, the company said it had drawn $50 million from a second-tier-secured term loan that was part of its rescue effort. It included warrants for 33.4 million shares at a strike price of $0.01, which will be highly dilutive.

The slide continued in early July, when the company announced that Ernst & Young had dropped its auditor. One reason for the company’s resignation was allegations of misconduct by senior management. That likely means that former CEO Peter Faricy and other executives who left are implicated, as the allegations “do not involve current members of senior management,” according to an SEC filing.

We know SunPower’s future is uncertain. The company has taken out financing to avoid bankruptcy, but its financial statements are questionable. That’s sending investors running.

Renewable energy decline

One of the main reasons renewable energy stocks are falling in 2024 is that the market is wondering when they’ll be able to make money. I’ve highlighted that SunPower needed a bailout, but Blink Charging and Bloom Energy aren’t looking much better. Net losses and cash burn are unsustainable at both companies.

BLNK net income data (TTM) by YCharts.

There was no major news about these companies, but it’s an example of the decline we’ve seen in most renewable energy stocks over the past month. After Fisker’s bankruptcy, investors seem to be realizing that patience is running out for some companies in the industry, and those reporting big losses are feeling the brunt of the pain.

The problem is that for some of these companies, it could be a downward spiral. In renewable energy, there is a constant need for project financing, and if the cost of that financing increases, it becomes less competitive with traditional energy sources or competitors. That could cause stocks to fall and market confidence to wane, which would drive up costs even more.

Over the last decade, we have seen a downward trend in the number of companies going bankrupt, and this may happen again.

Light at the end of the tunnel?

The good news is that demand for renewable energy is higher than ever, so companies that can get their cost structures in order can benefit. However, the risks are higher than ever now, and companies need to get their costs in order, which is putting pressure on profits through the end of 2024.

Is it worth investing $1,000 in SunPower now?

Before you buy SunPower stock, consider the following:

This Motley Fool Stock Advisor a team of analysts have just identified what they believe is Top 10 Stocks for investors to buy now… and SunPower wasn’t one of them. The 10 stocks that made the cut could deliver monster gains in the years to come.

Consider when Nvidia We created this list on April 15, 2005. If you invested $1,000 at the time of our recommendation, you would have $771,034!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio-building tips, regular analyst updates, and two new stock picks each month. Stock Advisor the service has more than four times S&P 500 return since 2002*.

See 10 actions »

*Stock Advisor Returns as of July 8, 2024

Travis Hoium owns shares of SunPower. The Motley Fool has no holdings in any of the stocks mentioned. The Motley Fool has a disclosure policy.