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SunPower's Restructuring Is A Bad Sign For Photovoltaic Industry

Jim Swanson

During its latest conference call with investors, SunPower Corporation (NASDAQ: SPWR) provided details of its new restructuring plan, including cost cutting initiatives, strengthening its balance sheet and closing its 700MW Philippines fab.

The company’s initiatives are indicative of worsening PV [Photovoltaic] market fundamentals, Axiom’s Gordon Johnson said in a report.

SunPower also guided to an increase in shipment to 1.3GW-1.6GW in 2017, from the 1.3GW projected for 2016. The company further indicated that the current supply/demand imbalance would improve in the second half of 2017.

Johnson has Sell ratings on SunEdison Inc (OTC: SUNEQ), GCL-Poly Energy Holdings Ltd, JA Solar Holdings Co., Ltd. (ADR) (NASDAQ: JASO), Trina Solar Limited (ADR) (NYSE: TSL), Yingli Green Energy Holding Co Ltd (ADR) (NYSE: YGE), Neo Solar Power Corp, Meyer Burger Technology AG, SMA Solar Technology AG and SolarEdge Technologies Inc (NASDAQ: SEDG).

Implications for PV Industry

Johnson cited the following reasons for SunPower’s restructuring being a bad sign for the PV industry:

  1. The company believes the US resi market has “corrected,” while this correction seems “far from over."
  2. Manufacturers continue to expand capacity, with price competition driving ASPs to new lows, which does not indicate the “production discipline” the company noted.
  3. China’s 2017 FiT reduction, which was revised higher, “could signal marginally less demand pull-in, but will likely still lead to a 2H17 demand cliff, while a leaked memo from Trump’s trans. team puts PV subsidies in the cross-hair, we posit demand could fall faster than supply rationalization,” Johnson wrote.
  4. Given the capital-intensity of SunPower’s PV projects, lower cost targets translate to lower growth.

Latest Ratings for SPWR

Date Firm Action From To
Dec 2016 Guggenheim Downgrades Buy Neutral
Nov 2016 Barclays Maintains Equal-Weight
Nov 2016 Baird Downgrades Outperform Neutral

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