SunPower Corporation

SPWR Details

SunPower Corp (NASDAQ: SPWR) is engaged in designing and manufacturing solar panels and systems for all-in-one residential and commercial solutions.

Result Performance for the Quarter Ended 4 July 2021 (Q2FY21)

• The growth across segments has translated into a robust 41.9% YoY growth in its overall revenue of $308.93 million in Q2FY21.
• SPWR’s sustained execution across its residential and commercial businesses has resulted in a 40% YoY growth in megawatts, and it doubled its gross margin per watt in Q2FY21.
• The company has added 13,000 customers in its Residential and Light Commercial business, with residential bookings up by 16% QoQ and 67% YoY.

Consolidated Statement of Operations (Source: Company Reports) 

Recent Update

• On 5 October 2021, the company announced that it would release its Q3FY21 financial results on 3 November 2021 at 1:30 p.m. Pacific Standard Time.
• On 5 October 2021, the company acquired Blue Raven Solar for a cash consideration of around $165 million. This acquisition will assist the company in expanding its domestic footprint in underpenetrated areas, including the Northwest and Mid-Atlantic regions.
• On 30 September 2021, the company has introduced SunPower 25X25 initiative that aims to deliver renewable energy to ensure further accessibility for historically marginalized communities.

Outlook

The company forecasts attaining GAAP revenue of $325-$375 million in Q3FY21, with MW recognized to stay between 125-150 MW. Further, it expects to achieve adjusted EBITDA in the range of $21-$31 million due to tremendous improvement in linearity. Additionally, it expects its GAAP net loss to be between $10-$0 million in Q3FY21.

For FY21, the company forecasts achieving GAAP revenue between $1.41-$1.49 billion and GAAP net income in the range of $40-$60 million. It expects MW recognized to remain between 540-610 MW. However, the company has retained its guidance on adjusted EBITDA at $110-$130 million.

Key Risk

The company’s business operations would adversely affect by changes in international trade policies, tariffs, or trade disputes. It relies on sustained availability of third-party financing arrangements for its projects to deliver its growth strategies. Further, an increase in the global supply of solar cells and panels, as well as intense competition, may hurt its product prices.

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

Stock Recommendation

The company has delivered 6-month and one-year returns of ~27.53% and ~+29.62%, respectively. The stock is trading below the average of the 52-week high price of $57.52 and the 52-week low price of $19.75.

The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price that reflects a low double-digit decline (in percentage terms). Accordingly, a slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average), considering a significant decrease in cash and cash equivalents at $140.46 million as of 4 July 2021 compared to $232.77 million as of 3 January 2021 and higher debt to equity ratio at 1.25x in Q2FY21 versus the industry median at 0.30x.

Considering the aforementioned factors along with its current trading levels and the associated business risks, we advise the investors to book profits. We give a “Sell” rating on the stock at the current market price of $30.02 per share as on 24^th November 2021.

Technical Overview:

Daily Price Chart

Source: REFINITIV, Chart Created by Kalkine Group 

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.