Bull of the Day: SunPower (SPWR)

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November 04, 2013 |

Thanks to strong demand and a turnaround in key international markets, solar power investments have been quite strong for much of 2013. ETFs tracking the sector have led the way for much of the year, including nearly a 120% gain for the top fund in the space, (TAN - ETF report).

And with a series of earnings beats lately, the short term future could be looking very bright for the sector as well. This is particularly true when looking at one of the top names in the space, SunPower (SPWR - Analyst Report).   

SunPower in Focus

SunPower is California-based company that designs and manufactures solar systems for residential, commercial, and utility purposes around the globe. The company is actually majority owned by European energy giant Total (TOT - Analyst Report), but it has been trading on its own for nearly a decade.

While some take strictly a low cost approach, SPWR zeroes in on high efficiency panels. According to their latest 10-Q, the company has among the most efficient panels in the industry, making this a key selling point for SunPower when compared to its competitors. This has been a great approach in the current solar power bull market, especially if you consider the company’s latest earnings results.

Recent SPWR Earnings

At the end of October, SPWR reported EPS of 33 cents a share, compared to a loss of 5 cents a year ago. Meanwhile, the company also crushed the consensus estimate, which called for earnings of 24 cents a share.

Although guidance disappointed some investors, SPWR is laying the groundwork for longer term gains. In fact, the firm announced that it was going to expand solar cell manufacturing capacity by more than 25%, bringing their total capacity to 1.8 GW, and suggesting to many that SunPower’s products remain in high demand.

Outlook

Thanks to this capacity expansion and the strong anticipated demand, SunPower is looking to have another high growth quarter. Year-over-year growth is currently expected to be 182%, while the full year growth is looking to come in at nearly 700% earnings growth when compared to the previous year.

Estimates have also moved higher in recent days, suggesting an increasingly bullish take by analysts. And with a strong history of beats—all of the last four have been beats—there is plenty of reason to believe that SPWR can live up to the hype next quarter as well.



Due to these factors, SunPower has earned itself a Zacks Rank #1 (Strong  Buy). This means that we are looking for more outperformance from this strong stock to finish up 2013, and for this company to continue to move higher.

Bottom Line

SunPower is looking great from several different angles. Its products are high quality and the industry is booming. The solar power industry is actually ranked in the top 20% overall, so there is pretty strong trend underlying the bull case here.

So if you are looking to get in on solar stocks, this high quality manufacturer—which has plenty of support from Total—could be an excellent choice. It is expanding capacity and if its efficient panels stay in demand, the stock may continue to rise as we end 2013.

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