SunPower Scales 52-Week High

Zacks Equity Research
June 30, 2014

SunPower Corp.’s (SPWR) shares attained a 52-week high of $42.07 during intraday trading on Friday, Jun 27, finally closing a trifle lower at $41.06. This San Jose, CA-based solar manufacturer has seen its stock price soar 27.1% since the beginning of the year.

What’s Driving SunPower?

A large part of SunPower’s success stems from its designing, manufacturing and supplying of large-scale solar systems. The company beat the Zacks Consensus Estimate on both lines in the first quarter of 2014 backed by strong demand mainly for its unique, cost effective, high efficiency products in residential projects as well as in the commercial markets where smaller systems generate higher returns.

SunPower's solar cells have one of the highest conversion efficiencies available for the mass market. This will give the company a distinct advantage in its domestic market as residential solar becomes increasingly popular. Recently, the Obama administration rolled out its plan to curtail carbon emissions from power plants by 30% by 2030 from 2005 levels. The proposed rule is expected to come into effect next year.

This residential solar market even outpaced the commercial and utility segments last year and has already started to attract more conventional electric power companies that produce power mostly from coal and natural gas. SunPower deployed 108 megawatt (MW) of panels for residential projects in the first quarter.

Management also hinted that capacity expansion is in the cards for 2014 to meet rising demand. It has already initiated the construction of a 20-MWac SunPower C7 Tracker (C7) power plant. Its 579-MWac Solar Star projects for MidAmerican Solar is also on schedule with over 170 MW grid connected.

Backed by its strong quarterly earnings and recent partnership with Google Inc. (GOOG), the company is all set to scale new highs. SunPower and Google have teamed up to form a $250 million fund to help homeowners across the U.S. go solar. This will boost SunPower's residential leasing program, which was launched in 2011. Through this program SunPower has gained significant traction in the U.S. solar rooftop installation market. Again, in Jan 2014, the company in collaboration with Bank of America Corporation’s (BAC) unit Bank of America Merrill Lynch launched a $220 million financing program for residential solar lease projects.

Recently, SunPower teamed up with Admirals Bank to launch a preferred-interest loan program, SunPower Loan program, for the homeowners of all 50 states of the U.S. and Washington, D.C. Admirals Bank will provide a $200 million loan facility to SunPower for residential solar programs over the next two years to encourage the installation of high-efficiency solar systems.

Moreover, anti-dumping duties imposed on Chinese solar producers by Washington will work in favor of SunPower and other U.S. based solar product manufacturers.

Key Picks from the Sector

SunPower holds a Zacks Rank #3 (Hold). Stocks worth considering in the solar industry include JA Solar Holdings Co., Ltd. (JASO) with a Zacks Rank #1 (Strong Buy).
 

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