Chardan: Solar Decision Removes Uncertainty For Sunworks Investors

President Donald Trump's administration imposed a 30 percent tariff on all solar equipment made outside of the U.S., a move intended to support domestic solar players, including Sunworks Inc SUNW.

The Analyst

Chardan's James McIlree comments on Sunworks' stock.

The Thesis

The tariff is "not as harsh" as many had expected and also "removes significant uncertainty" for the solar industry, McIlree said in a note. In fact, prices have already adjusted in anticipation of the decision so now that a decision is finalized there will be "little incremental impact" on prices. Inventory levels at installers moved higher ahead of the decision, which implies there should be some liquidation of inventory which counteracts some of the potential price pressures.

For commercial installers, solar modules represents around 20 percent of the total cost of the systems so the tariff will only increase the total system costs by up to 10 percent, McIlree said. Much of the industry's growth has been driven by the decline in prices so a potential price increase is "likely to have a deleterious impact on demand."

Specific to Sunworks, the company will be impacted but "probably less than the industry overall" since it operates mostly in the Commercial, industrial and agricultural markets. The company is still in the middle of internal changes to return to profitable growth, however, and there are likely lingering issues with margins in the fourth quarter and possibly in the first quarter.

Price Action

Shares of Sunworks gained more than 7 percent Tuesday morning.

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