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).

Q2FY21 (Ended July 4, 2021)

Residential Bookings Growth of 67% YoY: The period witnessed 67% YoY Residential Bookings Growth with 13,000 new customer additions. Gross margin stood at 21%, up 800 bps Y/Y and resi gross margin stood at 23%. SunVault attach rate in Direct sales channel stood at 23%.

Decent Operating Performance: Revenue stood at $309 million, as compared to $218 million in Q2FY20. Adjusted EBITDA stood at $22 million, as compared to -$4 million in the pcp. Net Recourse Debt stood at $283 million, as compared to $561 million in the pcp.

Key Metrics (Source: Company Reports)

Outlook:

Q3FY21 Guidance: GAAP Revenue expected in between $325 - $375 million and Adjusted EBITDA in the range of $21 - $31 million.

FY21 Guidance: GAAP Revenue expected in between $1.41 - $1.49 billion and Adjusted EBITDA in the range of $110 - $130 million.

Key Risks:

The COVID-19 pandemic and associated economic and other impacts could 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 Multiple Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation:

The company witnessed strong execution in Q2 FY 2021 which sets the stage for the significant growth over the coming years. The company is also possessing robust balance sheet.

We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price that reflects a rise of low double-digit (in % terms). We have assigned a premium to EV/Sales Multiple (NTM) (Peer Average) considering improved adjusted EBITDA as well as decent outlook.

Considering the aforesaid facts and future development plans, we give a “Buy” recommendation on the stock at the current market price of $23.69 per share, down by 2.55% on August 11, 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.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.