SunPower Corporation (NASDAQ: SPWR) provides a diverse group of customers with complete solar solutions and services. Residential customers, businesses, governments, schools, and utilities around the globe rely on SunPower’s more than 30 years of proven experience.
In its first quarter 2018 results, SunPower announced record performance in US Residential Business and the Company exceeded revenue, margin, and adjusted EBITDA Forecasts; SPWR’ strong first quarter performance was driven by solid execution in all markets while prudently managing expenses. Financially, Company’ efforts remain focused on improving cash flow, managing its working capital and executing on its restructuring initiatives. Furthermore, with its asset monetization plans on track and continued cost control, SPWR is well positioned to retire its $300 million converts in June as well as having the resources to fund its growth plans this year.
Key highlights for the first quarter 2018:
More recently on June 12th, the company announced a definitive agreement for Enphase Energy to acquire SunPower’s microinverter business for $25 million in cash and 7.5 million shares of Enphase common stock. The transaction is expected to close at the end of the third quarter of 2018. As a result of this strategic partnership, SunPower looks forward to benefitting from Enphase’s expertise, allowing it to continue containing costs, leveraging R&D support and helping streamline the company’s business priorities.
Also, the company is expected to benefit from California’ approval plan to require rooftop solar power for new homes. On May 9th, California became the first U.S. state to require solar panels on nearly all new homes built after Jan. 1, 2020. The solar power industry already provides 16% of California’s electricity, the highest rate in the U.S., and employs more than 86K workers and this move is a boost for the solar industry.
Analysts tracking the stock believes that solar industry is at a critical inflection point and is likely to grow at a significant pace over the medium term. This is expected to produce substantial growth opportunities for players like SunPower. Therefore, led by its robust financial flexibility and improving residential and commercial earnings, SPWR is expected to be one of the major beneficiaries of this upswing in the industry.
Considering all this, the company is in an extremely favorable risk-reward position, and there is enormous potential which we are yet to see in terms of share appreciation of the company.
About the company: As one of the world’s most innovative and sustainable energy companies, SunPower (NASDAQ: SPWR) provides a diverse group of customers with complete solar solutions and services. Residential customers, businesses, governments, schools, and utilities around the globe rely on SunPower’s more than 30 years of proven experience. From the first flip of the switch, SunPower delivers maximum value and superb performance throughout the long life of every solar system. Headquartered in Silicon Valley, SunPower has dedicated, customer-focused employees in Africa, Asia, Australia, Europe, and North and South America.
First Quarter 2018 Results:
Revenue: SPWR’ total revenue increased by 19% during the three months ended April 1, 2018 as compared to the three months ended April 2, 2017 , primarily due to an increase in the proportion of capital leases placed in service relative to total leases placed in service under its residential leasing program within the United States, as well as stronger sales of solar power systems and components to customers in its Residential Segment in North America; stronger sales of solar power projects in its Commercial Segment in North America, and stronger sales of solar power component and systems in Power Plant Segment in Europe.
Profitability: Net loss decreased by $89.3 million in the three months ended April 1, 2018, as compared to the three months ended April 2, 2017. The decrease in net loss was primarily driven by an increase in gross margin of $55.8 million, primarily as a result of decreased product costs driven by cost savings initiatives that the company implemented.
Liquidity: As of April 1, 2018, SPWR had unrestricted cash and cash equivalents of $260.7 million as compared to $435.1 million as of December 31, 2017.
Guidance for the near term:
Key risk factors and potential stock drivers:
- Uncertainty concerning U.S. residential solar market, which has slowed the overall demand situation in some of the states.
- Offtake from prospective solar homeowners & easy availability of solar-plus-generator financing for the consumers.
- Progress on growing EBITDA, improving liquidity and timely debt repayments.
- Impact of new capital raise & potential dilution in its equity shares and its effect on stock prices.
- The global Solar industry is highly competitive and still at a nascent stage. SPWR currently faces competition from other sources of power and players explicitly operating in the solar industry.
- Another key risk is related to government regulations, SPWR’s business is subject to extensive government regulation.
Stock Chart:
Comments:
- On Monday, June 18th, 2018, SPWR was at $7.74, on volume of 509K shares exchanging hands. Market capitalization is $1.1 billion. The current RSI is at 42.91
- In the past 52 weeks, shares of SPWR have traded as low as $6.46 and as high as $11.70
- At $7.74, shares of SPWR are trading below its 50-day moving average (MA) at $8.50 and below its 200-day moving average (MA) at $8.05
- The present support and resistance levels for the stock are at $7.29 & $8.17 respectively.
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