JinkoSolar Holding Co., Ltd.'s (NYSE:JKS) micro cap stock was down on Wednesday even though it announced late on Tuesday it had been awarded a contract from China Guangdong Nuclear Solar Energy Development Co.(CGN-SEDC).
According to Nasdaq, the contract marks a continued relationship between JinkoSolar and CGN-SEDC, and suggests the company will continue to be a major provider of innovative solar products in the near future. With a promising solar market in China, Zacks Equity Research said it believes the company will have favorable margins.
However, the research firm did include a potential problem that could arise from the contract, which may have contributed to the slide in JinkoSolar's shares.
"In the face of economic depression in Europe, the company's glut in production could result in higher inventories and cascading average selling prices, a phenomenon noticed industry-wide," Zacks wrote. "The company's overt reliance on the government for solar PV deployment could add to costs."
It appears investors took Zacks' warning to heart, with JinkoSolar's shares falling 12.3 percent, or 45 cents, to $3.20 as of 2:13 p.m. on August 29.