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Bear of the Day: JinkoSolar Holding (JKS)

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JinkoSolar Holding (JKS) is a Zacks Rank #5 (Strong Sell) that is a solar product manufacturer based in China. The company’s principal products are silicon wafers, solar cells and solar modules.

After a big earnings miss late last year and sector weakness in solar, JKS had a rough start to 2021, with the stock down over 60% from highs. However, a nice earnings report last week has the stock bouncing hard. Investors are now in a better spot after the stock cleared technical resistance, but they might want to take profits as analysts don’t seem too impressed

About the Company

JinkoSolar is headquartered in Shangrao, China and employs over 24,000 people. The company was founded in 2006 and sells its products to distributors, project developers, and system integrators; and utility, commercial, and residential customers.

JKS is valued at $2.5 billion and has a Forward PE of 55. The company holds a Zacks Style Score of “B” in both Value and Growth, but “F” in Momentum.

Q1 Earnings

The company reported a strong quarter, with EPS coming in 1400% above expectations. The company beat on the top line and saw margins higher. However, Jinko guided Q2 revenues and margins lower than the previous quarter. Analysts are no doubt picking up on this and lowering estimates.

Estimates

Over the last 7 days, all time frames have seen estimates falling lower. For the next quarter, analysts have dropped their numbers to $0.05 from $0.64, a plunge of 92%. For the next year things get a little better, but numbers are still falling 8%.

Despite the guidance cut and numerous analysts dropping expectations, the stock surged, moving from $38 to almost $60.

JinkoSolar Holding Company Limited Price and EPS Surprise

JinkoSolar Holding Company Limited Price and EPS Surprise
JinkoSolar Holding Company Limited Price and EPS Surprise

JinkoSolar Holding Company Limited price-eps-surprise | JinkoSolar Holding Company Limited Quote

Why is the stock climbing?

Part of the reason the stock shot higher was the high short interest in the name, with about 7 million shares short. This equates to about 26% of the float and when the stock started to move higher, these shorts were forced to buy.

However, the main reasoning behind the move up stemmed from the company’s move to IPO in China’s STAR market. This action will raise funds and allow the company to expand its business more rapidly. It also gives them more access to capital if needed down the road.

The combination of the China IPO news and the short interest caused the stock to break some important technical resistance, but the stock chart isn’t 100% bullish.

Technical Take

JKS is still 40% off last years highs, but investors might run into issues around the $59 level. This is the 61.8% Fib retracement drawn from 2021 highs to lows. Typically, we see selling in these areas, even if its only temporary.

The bulls will want to either take some profits or watch a pullback to the 200-day. That area is currently at $51.50 and if it doesn’t hold, then the bears will win back control and start pointing to the fundamentals.

In Summary

Solar is a very volatile sector and investors should look to take profits when they get big moves. When you throw a Chinese solar company into the equation, it amplifies the volatility, so investors should be extra cautious with Jinko.

If solar is an area of interest, investors should look First Solar (FSLR). The stock is a Zacks Rank #3 (Hold) that is based in Tempe, Arizona.

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