It’s fine to look for stocks trading at their lows, but don’t try to be a hero and take a risky share position in Pineapple Holdings (NASDAQ:PEGY). I am bearish on PEGY stock and hope that investors will find other avenues to get into the solar energy market.
Pineapple Holdings provides solar energy and backup power products to residences and businesses. The company recently expanded into Florida, and since Pineapple stock is only around $0.10, you might think that the share price ought to be much higher.
Don’t jump to any hasty conclusions, though. It only takes a quick glance at the company’s financial stats to see why an investment in Pineapple didn’t bear any fruit.
Pineapple’s Rotten Financials
Pineapple Holdings is expanding into Florida, and the company’s revenue growth is impressive. However, it’s ramping up its spending very quickly, leading to huge net losses.
Amazingly, Pineapple has tripled its revenue year-over-year from $5.888 million in 2022’s third quarter to $18.289 million in the third quarter of 2023. However, the company’s top-line results don’t tell the full story.
During the same time frame, Pineapple’s operating expenses ballooned from $3.828 million to $8.597 million. Bear in mind that this is a company with a market cap of around $1 million.
Thus, Pineapple’s Q3-2023 net loss of $2.329 million is actually greater than the company’s market cap. Certainly, that’s not a positive sign. Inflation was elevated last year, so that may have been a contributing factor, but Pineapple still needs to exercise cost-containment measures.
It’s also a red flag that Pineapple has agreed to sell 2.7 million common shares in a direct offering. Naturally, this raises questions about share-value dilution. Pineapple expects to generate approximately $1 million in gross proceeds from the direct offering, but investors might wonder how quickly the company will spend that money.
Conclusion: Should You Consider PEGY Stock?
It’s encouraging that Pineapple is expanding its operations. Yet, that’s not a sufficient reason to invest in the company now.
Pineapple’s financials are problematic, and the company might end up resorting to large-scale share sales again at some point in the future. Therefore, even if you’re bullish on the solar energy industry in general, this likely isn’t a good time to consider buying PEGY stock.
