SunPower Corporation (NASDAQ:SPWR) beat expectations again for 1Q14, but this is to be expected considering the company’s history of lowball guidance that almost guarantees a headline beat each quarter. GAAP revenue for last quarter was $692 million, compared to guidance of $575 million – $625 million, and GAAP gross margin was 23.5% compared to guidance of 18 – 20%. SunPower stock rose 6.75% from $32.02 to $34.18 on the news.
Analysts adjust to low guidance
Of course analysts have started to adjust to this consistent low guidance. Raymond James analyst Pavel Molchanov, who rates SunPower Corporation (NASDAQ:SPWR) Market Perform in an April 25 report titled Crushes 1Q14 Guidance Like a Russian Tank Over Ukrainian Border Post’, expected revenues of $629 million. SunPower has a non-GAAP EPS of $0.49 compared to a consensus of $0.32 and Molchanov’s estimate of $0.35, but this discrepancy is less because the company has outperformed expectations and more because its financial reporting makes it difficult for analysts to set expectations accurately.
Molchanov warns that SunPower Corporation (NASDAQ:SPWR) has “very lumpy quarterly results and complex, low-visibility financial reporting. In addition, we believe valuation is relatively pricey, especially in the absence of enough segment-level metrics that are needed for a true sum-of-the-parts approach.”
SunPower Corporation (NASDAQ:SPWR) has three different business segments: third-party photovoltaic (PV) modules, utility-scale PV systems, and financing residential solar leases. Molchanov is bullish on the residential solar leases part of the business, and less interested in the other two. He sees signs of growth in that segment, with cumulative installations reaching 157 MW, but because the company doesn’t provide enough detail to know how much of its revenues are coming from each segment (compared to rival company SolarCity Corp (NASDAQ:SCTY) which provides detailed retained value metrics), he finds the current valuation of 23x 2015E EPS to be too high.
SunPower says revenue will drop in second quarter
SunPower Corporation (NASDAQ:SPWR) has given low guidance for the rest of 2014, but this is to be expected. Management has set the current range for non-GAAP EPS at $1.10 – $1.40 for 2014 with $0.15 – $0.35 in 2Q14, compared to Molchanov’s estimate of $1.34 and a consensus $1.38 for the year. This would imply that there will not only be a sequential drop next quarter but that the rest of the year will all be worse than 1Q14, but Molchanov marks this up to ‘perennial lowballing’.
