SunPower Expects a Return to Profit

Zacks

SunPower Corp. (SPWR) shares jumped 8.5% to $20.65 in the New York Stock Exchange as the company provided its top as well as bottom line expectations for the second quarter and the full year.

The second largest U.S.-based solar panel maker after First Solar Inc. (FSLR) now sees second quarter non-GAAP revenue between $550 million and $600 million, gross margin of 14%–16%, earnings per share (EPS) between 5 cents and 15 cents, and 260-280 megawatts (MW) of solar energy projects recognized.

Not having recognized any profit since 2010, the company now expects to generate revenues between $2.5 billion and $2.6 billion, gross margin of 15%–17%, EPS between 60 and 80 cents, 1.0-1.1 gigawatts (:GW) of solar project recognition and capital expenditures of $60 million to $80 million, in 2013.

The San Jose, California-based company also expects to increase the installed customer base by twofold from the 2012 level to 300,000 projects by 2015. Also, SunPower is focused on boosting the panel efficiency level by 10% to 23% between 2012 and 2015.

Over the same timeframe, cost per watt is expected to decrease 35%. The company expects to deploy around 1.5 GW in 2015 as against 1 GW in 2012, with the mix shifting to international power plants.

SunPower − majority-owned by French oil company Total SA (TOT) − aims to cut 2013 operating expenses by 10% from 2012 levels.

Of late, solar stocks have been volatile and the industry is still under pressure to cut expenses amid lower prices and alterations in government subsidies. Investors are generally looking for a more upbeat scenario for the solar groups and this latest projection from SunPower boosted share prices of many Chinese players, like Suntech Power Holdings Co. Ltd. (STP, up 10.2%); Trina Solar Limited (TSL, 4.6%), JA Solar Holdings Co., Ltd. (JASO, 6.9%) and Yingli Green Energy Holding Co. Ltd. (YGE, 3.8%).

The leading U.S. installer of solar panels on home rooftops SolarCity Corporation (SCTY) rose 2.3% following a 12.4% drop on May 14 and a 24.2% gain on May 13, following its earnings release. However, First Solar shares edged down 1.1%.

Yingli Green, SolarCity and First Solar hold a Zacks Rank #3 (hold), while Trina Solar and  JA Solar Holdings retain a Zacks Rank #2 (Buy).

Though the momentum is back for solar stocks following the positive guidance from SunPower, we remain on the sidelines due to the glut of solar panels in the market, lower average selling prices (ASPs), subsidy roll-back risk in Europe, rising competition, financial stability of its customers and foreign exchange risk.

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