Recent Losses Expose Flaws in Canadian Solar's Expansion Plans

Canadian Solar may be one of the biggest solar manufacturers in the world, but that doesn't guarantee success in a highly competitive industry.

The effects of a sharp decline in solar panel prices are finally being felt by some of the world's largest solar manufacturers, and today it was Canadian Solar's (NASDAQ:CSIQ) turn to report a down quarter. But this quarter may be more notable than those that came before it.

Canadian Solar's shipments in the fourth quarter were 1,612 MW, behind JinkoSolar Holding Company's (NYSE:JKS) 1,733 MW; its gross margin of 13.9% (on an adjusted basis) was also lower than the 14.3% at JinkoSolar. We could see Canadian Solar falling behind another major competitor. And if margins continue to drop, it could be bad for the company's expansion plans over the long term.

IMAGE SOURCE: GETTY IMAGES.

The easy money is gone

Before we dive more into results, I think it's important to note that Canadian Solar is operating in a more normal environment today than it has in the past few years. In late 2014 and early 2015, the company completed a number of very high-margin Canadian projects, leading to a windfall of profits:

CSIQ NET INCOME (TTM) DATA BY YCHARTS.

But the easy-money projects are now gone from financial results, and the company is competing by selling solar panels and developing solar projects, just like everyo