SunPower Corporation

SPWR Details

SunPower Corp (NASDAQ: SPWR) is a vertically integrated solar module manufacturer and systems installer. The company's modules derive from crystalline silicon technology and possess the industry's highest conversion efficiencies (the percentage of sunlight that is converted into electricity).

Results Performance (Year ended 3 January 2021 – FY20)

Revenues of the company for the full year period increased by 3% over previous year, primarily due to increases in revenue of the Commercial and Industrial Solutions segment. Total cost of revenue increased by 3% over previous year. Its gross margin stood at 15% in-line to the FY19. Net loss attributable to non-controlling interests and redeemable non-controlling interests stood at $2.335 million, as compared to $34.037 million in the previous year.

Key Financial Metrics (Source: Company Reports)

Outlook:

The company expects that its strategy will provide attractive opportunities for profitable growth over the long term.

The major challenge from the pandemic is on project installation and commercial and consumer spending as well as the ability of the company’s sales channels, supply chain, and distribution centers to operate with minimal disruption in the near term, especially if local governments impose new measures and restrictions.

Key Risks:

The COVID-19 pandemic and associated economic and other impacts adversely affect its business results of operations, cash flows, and financial condition. Other than this, the execution of the company’s growth strategy is dependent upon the continued availability of third-party financing arrangements for its projects, including its residential lease and loan programs, and is affected by general economic conditions and other factors.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

After witnessing a sell-off, the stock has given a weaker close for the ongoing week at $23.94. The technical indicator RSI with a reading around 45 and a curve at the end pointing down, suggests softening of bullish momentum for the stock.

Going forward, the stock may have resistance around the $27.57 whereas support could be around the $20.90.

Stock Recommendation:

The company’s net margin for FY20 stood at 53.1%, better than the industry median of 10.5%. We have applied EV/Sales based relative valuation (on an illustrative basis) and the target price reflects a rise of low double-digit (in % terms). We have applied a slight premium to EV/Sales Multiple (NTM) (Peer Average) considering fall in total debt.

The stock has made a 52-week low and high of $5.7420 and $57.5199, respectively.

Considering the aforesaid facts and future development plans, we give a “Buy” recommendation on the stock at the current market price of $23.94 per share, down by 14.65% on July 14, 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.