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Real Goods Solar, Inc. (RSOL), JA Solar Holdings Co., Ltd. (ADR) (JASO): Are Monday’s Monster Moving Solar Stocks A Buy?

Real Goods Solar, Inc. (RSOL)On Monday, we saw two different solar-related stocks trade higher by more than 50%. Both companies had been under-the-radar stocks prior to Monday’s large returns, but now are attracting a lot of interest among retail investors. Thus I am looking at both to determine what created such large movement and if it’s a buying opportunity.

A Quick & Sudden Gain For This Small Solar Company

Real Goods Solar, Inc. (NASDAQ:RSOL) is a $180 million solar energy company that serves commercial, residential, and utility customers. After Monday’s gains of more than 50% the stock has now accumulated a two-day gain of 300%. Why is this company racking up such scorching gains, and is it an investment opportunity?

As crazy as it may seem, there was no catalyst for its rise — nothing except for an article from a new SeekingAlpha contributor, which apparently led to this massive 300% two-day rally.

In the article, Andy Zelenak calls Real Goods Solar, Inc. (NASDAQ:RSOL) a potential “diamond in the rough,” and presents it as an investment alternative to SolarCity. In the article, Zelenak identifies two potential catalysts: a partnership with Lennar Corporation as a “strategic supplier” of solar equipment, and their new “PowerOn” pre-engineered solar modules.

After several reads, I can’t find anything in Zelenak’s article that would trigger a rally. It contained no new information — simply speculation about what “could” happen if the company catches every break and if all dominos fall in its favor. I’m not so optimistic, and I feel confident that investors could get hurt if things go badly for Real Goods Solar.

The company’s business plan involves no-money-down leases in a volatile solar pricing market, and it has serious liquidity issues. Real Goods Solar, Inc. (NASDAQ:RSOL) needs to extend its maturity date of its revolving line of credit with Silicon Valley Bank; it’s already said in its latest 10-Q that it doesn’t have sufficient funds to repay its debt.

That leaves Real Goods Solar, Inc. (NASDAQ:RSOL) with virtually no cash, mountains of debt, and — until its recent 300% two-day gain — no value in its stock. I’d expect significant dilution in the coming days, maybe weeks if investors are lucky, if Real Goods Solar, Inc. (NASDAQ:RSOL) issues and sells its newly valuable stock to replenish its coffers.

On a final side note, this was a $15 million company last year. Now it trades at $181 million. If you must invest in this stock — and I wouldn’t — be very careful.

This Company’s Comeback Story Keeps Getting Better

After JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) announced earnings on Monday morning, its stock rose 6% in premarket hours, and then kept climbing throughout the day. It’s currently at new 52-week highs, with a 64% post-earnings gain.

In the quarter, JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) posted revenue growth of 4.7% or $270 million ($41 million better than estimates), and a loss of $0.85 per share ($0.35 better than the consensus). With such a massive beat, it’s quite easy to see why the market is responding so favorably.

Although the company did post an eighth consecutive quarterly loss, and did see photovoltaic panel prices decline, it also showed huge progress that suggests future improvements. The company’s total shipments rose 20.9%, easily topping expectations.

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