Shares of SunPower Corporation (SPWR - Analyst Report) hit a 52-week high of $24.45 on Jul 5, 2013. The shares closed at $24.43, 380% above the year-earlier share price of $5.09.
Recently, President Barack Obama unveiled a fresh climate change strategy that will likely limit pollution from existing coal-fired power plants. He issued directives asking environmental regulators to set up carbon pollution standards for active plants. This news came as a blow to coal-fired utility stocks. However, renewable energy stocks like SunPower have witnessed noticeable jumps. A major growth area in the renewable space is solar energy. With the increasing need to develop renewable energy in response to stringent environmental regulations, countries worldwide are relying on solar energy for generating electricity.
Not having recognized any profit since 2010, the company recently announced that it expects to generate revenues between $2.5 billion and $2.6 billion, gross margin of 15%–17%, earnings per share between 60 and 80 cents, 1.0-1.1 gigawatts of solar project recognition and capital expenditures of $60 million to $80 million, in 2013.
The company also expects to double the installed customer base from the 2012 level to 300,000 projects by 2015. Also, SunPower is focused on boosting its panel efficiency level by 10% to 23% between 2012 and 2015. Over the same timeframe, cost per watt is expected to decrease 35%.
Coming to operational efficiency, SunPower’s inventory turnover is 6.43 compared to only 3.42 times for the Zacks industry average. In addition, SunPower’s operational effectiveness is evident in its industry-high Return on Investment of 1.3% compared to -4.1% for the Zacks industry average. The current ratio is 1.68 compared to 0.91. Also, from the financial aspect, the company has a long-term debt-to-capitalization ratio of 18.8% compared to the Zacks industry average of 42.4%.
SunPower’s customer base is spread across North America, Europe, the Middle East, Asia and Australia. The company is proactive in entering new markets. In addition to a sizeable presence in the U.S., it is already focusing on improving market share in France, Germany, Italy, Spain and Japan, while gaining new market share in the emerging renewable markets of England, Greece, Israel and Malta.
Though the momentum is back for solar stocks, we remain on the sidelines for SunPower due to the glut of solar panels in the market, lower average selling prices, subsidy roll-back risk in Europe, rising competition, financial stability of its customers and foreign exchange risk. The company presently retains a short-term Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for 2013 and 2014 is 62 cents and 85 cents reflecting year-over-year growth of 441.67% and 38.21%, respectively.
Recently, First Solar Inc.’s (FSLR - Analyst Report) shares also surged 7.8% to $44.48 buoyed by President Barack Obama’s proposal to reduce emissions from coal plants. Stocks worth considering at the moment are JinkoSolar Holding Co., Ltd. (JKS - Snapshot Report) and Yingli Green Energy Holding Co. Ltd. (YGE - Snapshot Report), both with a Zacks Rank #2 (Buy).