We maintain our Underperform rating on
). The company operates in an industry that has moved from a
supply-driven to a demand-driven environment, with increasing
competitive pressure, as the photovoltaic industry's total
manufacturing capacity exceeds the current demand for solar
Currently, the average selling price (ASP) of SunPower's solar
modules dropped sharply in the residential and commercial segments
due to an industry-wide oversupply glut. These segments make up
two-thirds of the company's top line.We are skeptical of any
near-term margin recovery and believe the cascading ASP scenario
will persist for some time to come.
SunPower is a vertically-integrated solar manufacturer, with a
presence along the entire solar value chain from cells through
installation. However, we expect the stock to be further restrained
by the higher cost structure of the company compared to its peers,
the glut of solar panels in the market, subsidy roll-back risk in
Europe and foreign exchange volatility.
Besides, a substantial portion of SunPower's construction
contracts are fixed-price. If these contracts are not sufficient to
cover unanticipated changes in costs over the life of the project,
the company might even book losses. This continues to be an add-on
risk for the company.
Recently, SunPower Corporation reported first-quarter 2012
adjusted loss of 23 cents per share, versus earnings per share of 1
cent in the year-ago quarter. However, earnings were in line with
the Zacks Consensus Estimate.
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.
Some of the main competitors with which the company has to
compete in the current tight environment are
Canadian Solar Inc.
STR Holdings, Inc.
CANADIAN SOLAR (CSIQ): Free Stock Analysis
SUNPOWER CORP-A (SPWR): Free Stock Analysis
STR HOLDINGS (STRI): Free Stock Analysis Report
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