TOYO Earnings Preview and discussions with management
I will lay out my plan for how I am playing this earnings
In January/Feb I called $TOYO the naughtier girlfriend of the solar trade. The stock almost did 150-200% since I shared it
If you wish you can read the original thesis here. They are releasing their Q2 Earnings tomorrow.
But then it gave it all back — 75% off the $17.43 high, trading currently at $5.65
And now my DMs all ask the same thing: is the thesis dead?
I sat down with the management Rhone Resch (CSO) on a recorded 42-minute call to walk through all of it. Here’s the full honest picture — the good, the hedged, and the dangerous risks
It is the only Solar business that reports Positive EBITDA and Positive Net income (±100M of EBITDA in 2025 and guided for $90-100M of Net income in 2026) without 45X credits
There are a lot of Policy related unknowns that will need answering
Here is a refresher. The company has been experiencing a massive growth
Q1 2026: $142.8M revenue, up a massive 177% YoY. Gross profit $47.8M — a 33.5% margin!! Net income $28.4M.
One quarter. A year earlier, the same quarter was a $3.7M loss.
Have a look again.
Market cap: $240M. That’s ±2.4x current P/E, for a company that’s growing massively. Value-stock pricing on a growth-stock income statement.
Q1 operating cash flow was +$33.4M. Customers have prepaid $133M in deposits for future modules.
So why 2.4x Only? Clearly there are big risks. I will explore further, but here they are in short
AD/CVD circumvention on Ethiopia. That Ethiopia’s duty-free status doesn’t survive
§337 Patent issue that FSLR sued all of the industry naming TOYO as an infringer. TE/T1 just recently spent 135M acquiring Singapore-based Evervolt Green Energy Holding for Topcon Patents.
Texas funding gap. ±$310M funding gap exists for the HJT facility that they are trying to resurrect in the US
Section 232, how much benefits can they claim?
What management told me on the call
Four things stood out. I’m quoting precisely, because precision is the whole point here.
On the 45X tax credits - up-to-$0.07/watt subsidy for US-made modules. They are generating credits at the Houston plant. They have booked nothing and sold nothing. A third-party legal opinion is in hand for 2025, another in progress for 2026. When I pushed — do the credits come for sure? — the answer was:
“We’re not going to say for sure... we only recognize them on the P&L once we actually either sold them or have a verification from the IRS.”
That’s the conservative answer, and I respect it. But note what it is not: booked money. Buyers now want the credits wrapped in insurance before they pay. An actual executed credit sale would almost certainly be a stock mover event. Completely not priced in for 2026. Although the slides have 45X through 2030 pasted everywhere.
On dilution. The $357M Texas cell fab needs funding, and the June raise — $50M at $11, with a full warrant at $13.20 attached — cost the stock 38.8% in a single day. Management’s words on the call:
“Anything equity or equity-linked is not a viable source of financing at this point. The plan is 45X monetization, non-dilutive debt, and operating cash”
Read that carefully. It means “we can’t issue at these prices.” It does not mean “we promise never to.” The plan holds — if the cash keeps flowing.
The management is cognizant that the equity is super undervalued right now and using it to raise cash would be short sightedness.
