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SunPower sees $27 million of supplier-quality-related charges in Q4 and $4 million in Q1 of 2022 as it pursues recovery of costs from the suppliers.
The company intends to fund the charges with cash on hand. The company held cash and equivalents of $280.8 million as of October 3, 2021.
Excluding the charge, Q4 adjusted EBITDA results will likely be at the low end of SunPower's previously disclosed guidance range of $18 million - $41 million.
The factors affecting Q4 adjusted EBITDA include $6.5 million of Residential EBITDA effectively pushed into 2022 due to weather in California and COVID impacts. Another $3 million was invested in sales and marketing to rapidly expand SunPower's serviceable solar market to more customers in underpenetrated areas nationally.
Analyst Rating: JPMorgan analyst Mark Strouse lowered the price target on SunPower to $23 from $27 and reiterated an Underweight rating on the shares. The price target implies an upside of 21% to January 20, 2022, closing price of $19.02.
The analyst believes investor expectations are low heading into the Q4 alternative energy earnings season.
Near term, still challenging supply chain issues, geopolitical tensions, and a steady U.S. Investment Tax Credit over 2021 and 2022 will likely result in the delay of some utility-scale projects.
While the analyst believes residential solar is "relatively more immune" to these challenges, he says near-term visibility "remains somewhat limited" until a final determination regarding potential changes to California's net metering policy.
Strouse sees the space to remain volatile near term and generally expects visibility and margins to improve as the year progresses.
Price Action: SPWR shares traded lower by 16.8% at $15.83 on the last check Friday.
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