Sunpower Corporation (SPWR) Still Riding High on Solar Stock Frenzy


Sunpower Corporation (NASDAQ:SPWR) is one of the many solar stocks which is benefiting from this week’s solar rally, and it continues today. Shares rose as much as 2% in early trading, although Raymond James analysts aren’t inspired by the company’s 2014 guidance, which was provided in last week’s quarterly earnings report.

Sunpower’s position looks solid

Analyst Pavel Molchanov said Sunpower Corporation (NASDAQ:SPWR)’s position within the solar market is solid, especially because of its balance sheet. However, he balances this with the “very lumpy quarterly metrics and complex, low-visibility financial reporting.”

He also thinks Sunpower’s valuation is rich when looking at non-GAAP and calls its GAAP basis metrics “still almost meaningless.” He said this means that even when Sunpower has a solid quarter like it did in the fourth quarter, it isn’t easy to create upside because the company is “priced for perfection.” He maintained his Market Perform rating on the company.

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Looking at Sunpower’s results

The analyst notes that Sunpower Corporation (NASDAQ:SPWR) tends to set the bar for its earnings reports pretty low so that it practically ensures it will beat expectations. The solar company reported $638 million in GAAP revenue, beating its guidance for between $575 million and $625 million. GAAP gross margins were 20.5%, once again beating guidance of between 17% and 19%. Non-GAAP earnings per share was 47 cents, compared to expectations of 28 cents. Molchanov notes that Sunpower continues to report “ultra-chopping quarterly financials and a “famously wide” gap between GAAP and non-GAAP metrics.

Sunpower Corporation (NASDAQ:SPWR) tightened its range for its 2014 guidance as well. The company introduced non-GAAP earnings per share expectations of $1 or more in November and then tightened it to between $1 and $1.30 per share in its latest report. Sunpower guided for first quarter earnings of between 25 cents and 40 cents per share, implying little or no improvement later in the year. The analyst didn’t see anything necessarily wrong with Sunpower’s guidance but simply said it wasn’t enough to get Wall Street excited about the company.

Examining Sunpower’s financing deal

He notes that Sunpower Corporation (NASDAQ:SPWR) announced a deal with Bank of America which covers $220 million in tax equity financing for residential leases. That solves a problem with lease availability, which had been a concern last year. In his estimates, this should fund around 60 megawatts of installations. Last year Sunpower installed 147 megawatts in all for more than 20,000 customers.

Unlike SolarCity Corp (NASDAQ:SCTY), the company keeps quiet about retained value metrics. However, the company did say on its recent earnings call that it was planning an asset-backed securitization for some time this year. It would be similar to SolarCity’s $54 million bond offering in November.

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