We are maintaining our Neutral recommendation on vertically
integrated solar Photovoltaic player
) . We feel over the longer run the company offers growth prospects
due to its diversified channel strategy with a strong presence in
the residential and commercial market, along with its status as a
conversion efficiency leader. The company also has a steadfast
focus on spreading its revenue stream by climbing the solar value
SunPower Corporation designs, develops, manufactures, markets
and sells high-performance solar electric power technology
products, systems and services worldwide for residential,
commercial and utility-scale power plant customers. The company's
semiconductor-based solar cells and solar panels, which convert
sunlight into electricity, are manufactured using proprietary
processes and technologies.
SunPower Corporation's third quarter 2011 adjusted loss per
share came in line with the Zacks Consensus Estimate of a loss of
$0.06. However, earnings were below the year-ago earnings of $0.11
per share. The results were driven by effective performance from
its Residential and Commercial (R&C) and Utility and Power
Plants (UPP) businesses. The results also reflect cost reduction
efforts and commencement of production on the first line using
step-reduced cell manufacturing process.
On a reported basis, the company posted a loss of $3.77 per
share versus an EPS of $0.21 in the year-ago quarter. In the third
quarter of 2011, the variation between reported and adjusted
earnings came from goodwill and other intangible asset impairment
($3.56), tax effects ($0.06), amortization of intangible assets
($0.07), loss on change in European government incentives ($0.01),
non-cash interest expense ($0.07) and gain on sale of equity
interest in unconsolidated investee of $0.04.
SunPower's customer base is spread across North America, Europe,
the Middle East, Asia and Australia. The company is proactive in
entering new markets. In addition to a sizeable presence in the US,
it is already focusing on improving market share in France,
Germany, Italy, Spain and Japan, while gaining new market share in
emerging solar markets like England, Greece, Israel and Malta.
SunPower is also increasing its global market presence within
the residential and commercial markets by expanding its network of
approximately 1,750 dealers. By the end of fiscal 2011, the company
expects its global dealer network to almost double to around 2,000
dealers. Finally, by steering clear of long-term contracts for
sales through its dealer network, the company is geared for margin
growth through any short-term upswing in the solar market.
SunPower Corporation competes with the likes of
Solar Power, Inc.
Westinghouse Solar, Inc.
Over the near term, however, we are apprehensive about several
factors, including the higher cost structure of the company
compared to its peers, the glut of solar panels in the market,
lower Average Selling Prices, subsidy roll-back risk in Europe, and
foreign exchange risk. Thus, we assign a short-term Zacks #4 Rank
(Sell) on the stock.
SUNPOWER CORP-A (
): Free Stock Analysis Report
WESTINGHOUSE SL (
): Free Stock Analysis Report
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