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With the election of President Joe Biden, the narrative for clean energy infrastructure now provides substance beyond the usual talking points. Under his administration’s American Jobs Plan, the government will earmark funds to bolster environmentally friendly energy sources. Naturally, this supports the fundamental case for FTC Solar.
Yet the recent winter storm in Texas and other states put a damper on the proceedings. Many influential people blamed renewable energy infrastructures for grid failures that devastated impacted regions. While compelling, FTC Solar is also one of the trickiest stocks to navigate.
FTC Solar Financial History
The beauty behind the FTC Solar IPO is its extraordinary pertinence to current national and world affairs. Amid a cacophony of misinformation and conspiracy theories, growing evidence of climate change indicates that we must implement alternative energy sources for the sake of our planet. Bolstering the power grid with solar energy will go a long way toward the Biden administration’s goal of becoming a net-zero emissions country by 2050.
Unfortunately, the COVID-19 pandemic threw a monkey wrench in this green energy development. Further, FTC Solar’s recent financial history suggests it absorbed significant impact.
According to its Form S-1 filing with the Securities and Exchange Commission, in 2020, FTC Solar generated $187.3 million in revenue, up nearly 253% from the prior year. Although impressive, what wasn’t encouraging was the rise in total operating expenses, which almost doubled to $20.6 million in 2020. Therefore, net losses widened to $15.9 million from $13.5 million in 2019.
Some of this impact likely stems from the pandemic’s disruption to global supply chains. Though the solar energy industry generally keeps high inventory of critical components due to prior harsh lessons, demand probably outstripped supply in 2020. This may have contributed to FTC’s higher expenses.
FTC Solar Potential
Before the Texas winter storm wreaked devastation, the solar industry was off to an auspicious start to the new year. For instance, the Invesco Solar ETF (NYSEARCA: TAN) was up nearly 72% between Nov. 2, 2020 and Feb. 9, 2021. But shortly thereafter, the solar benchmark along with several individual players corrected sharply.
Not helping matters were political pundits that squarely blamed renewable energy and their intermittent nature for the loss of power. However, the truth is that myriad factors contributed to the disaster, ranging from mismanagement to antiquated infrastructure. In the bigger picture, though, the storm is likely a one-off event. This poses a discount opportunity in the FTC Solar IPO for contrarians.
More importantly, the company is in the business of solar tracking systems, which move solar panels to directly face the sun at all times. Compared to static fixed-mount panels, tracking systems generate around 40% more energy.
Of course, this will not eliminate solar energy’s inherent intermittency challenge. Nevertheless, a 40% production improvement represents a massive step toward green energy viability.
How to Buy FTC Solar (FTCI) Stock
Usually, you have two ways to participate in an IPO. If you are a well-connected private investor with a deep pocket book, you may have an opportunity to buy IPO shares at their initial offering price. This allows you to take advantage of the IPO pop or the enthusiastic increase in price when shares become available to the public.
However, most regular retail investors must wait until the launch date. This isn’t always a bad deal as FTC Solar demonstrated with its per-share pricing discount relative to its initial target. Plus, if you already know how to buy stocks, the participation process is straightforward.
If not, below are the easy steps to follow.
- Pick a brokerage.
Before you can do anything in the stock market, you must pick a brokerage. As intermediaries, brokerages provide an important service, facilitating access to the equity units you want to trade.
Better yet, thanks to increased competition and the advent of convenient mobile investment apps, most brokerages offer the same financial incentives, such as commission-free trading. Therefore, your decision comes down to personal preferences.
If you have an extremely busy schedule, you may find that a mobile app is perfect for your needs. Conversely, if you want to develop your investing acumen, you should sign up for a robust and comprehensive platform. - Decide how many shares you want.
Next, you must decide how many shares of the FTC Solar IPO you want to acquire. The share count is critical as it determines your holding’s risk-reward profile. If you own more shares, you will receive greater rewards when your target stock moves higher.
But the opposite is also true. If the target stock stumbles, you will lose more money. Therefore, only limit your biggest dollar purchases to your highest-conviction ideas.
No matter what your magic number is, make sure to think about this before you start trading. You want to base your decision on well-reasoned strategies, not whimsical emotions. - Choose your order type.
Since market prices always fluctuate, you will need to consider which order type to use.
• Bid: The bid is the maximum price a buyer will offer for a stock. It is always lower than the ask.
• Ask: In contrast, the ask is the lowest price that a minimum will take. It is always higher than the bid.
• Spread: While the spread is simply the difference between the bid and ask price, it’s a critical indicator of liquidity and risk. Narrower spreads indicate higher liquidity levels, and thus, lower risk as you can reliably depend on the existence of a willing buyer. Wider spreads signal lower liquidity and higher risk because a buyer may not be present when you wish to sell.
• Limit order: Use a limit order to buy stock at a specific price. Be aware that a stock is not guaranteed to hit your predetermined price, which will leave your order hanging unfulfilled.
• Market order: To buy shares at the next available price, use a market order. Buy orders execute on the ask, while sell orders execute on the bid.
• Stop-loss order: A stop-loss order protects you from downside as it exits your position at either a predetermined price or the next available price. Watch out for gap-down sessions, where a stock opens at a much lower price than the prior session’s close.
• Stop-limit order: Stop-limit orders exit you only at a predetermined price, eliminating the negative surprises that a gap-down session can impose on a stop-loss order. However, the risk is that the target stock never reaches the predetermined price following a gap down. - Execute your trade.
To execute your trade, follow these steps for a market order:
• Select action type (buy or sell).
• Enter the shares you want to acquire (or sell).
• Hit the Buy (or Sell) button.
Limit orders follow an identical procedure, except that you must enter your desired execution price.
Best Online Stock Brokers
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Clean Energy Contrarianism
In recent years, mainstream society recognized the need for clean energy solutions, fueling the rise of the solar energy industry. Unfortunately, the pandemic combined with natural disasters contributed to the sector. Nevertheless, the FTC Solar IPO could be a compelling contrarian opportunity based on longer-term political tailwinds and growing consumer-level demand.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.