Why Roth Capital Is Selling Yingli Green Energy

Following the company’s latest Q3 and 2015 shipping guidance, Roth Capital Partners has had enough with Yingli Green Energy Holding Co Ltd YGE and has downgraded the stock to Sell. Analyst Philip Shen believes that Yingli’s debt will continue to weigh on the company’s operations and that it will need to sell assets to make its upcoming October payment.

Negative feedback loop
Unfortunately for Yingli shareholders, Shen believes that the company’s disappointing shipment guidance will damage the fragile confidence that many of the company’s customers have in the company. As a result, he predicts that customers will begin looking to transition to other vendors that have a more certain future.

Yingli’s business is weakening at a bad time for the company, as debt payments begin to accelerate to about $161 million in October and about $226 million in May of 2016.

The numbers
Yingli’s disappointing Q2 preannouncement of $438 million in revenue badly missed both consensus estimates ($495 million) and Roth’s estimate ($546 million). The company also reported earnings per share of -$0.53, well short of consensus expectations of -$0.22.

In terms of guidance, Yingli’s Q3 estimates of 550-580MW falls woefully short of Roth’s prediction of 1,010MW. In addition the company is now guiding for gross margins of only 10.0 percent versus consensus expectations of 14.6 percent.

Outlook
In addition to the downgrade, Roth cut its 2015 revenue forecast for Yingli from $2.3 billion to $1.8 billion and its EPS forecast from -$0.81 to -$1.58. The firm now has a $0.50 price target for the stock.