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On Jan 10, we have maintained our Outperform recommendation on the solar company SunPower Corp. (SPWR - Analyst Report).

Why the Reiteration?

SunPower is one of the most forward-integrated solar companies, focused on moving up the value chain. Its customer base is spread across North America, Europe, the Middle East, Asia and Australia. 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 solar markets of England, Greece, Israel and Malta.

Its third quarter 2013 earnings easily beat the Zacks Consensus Estimate and the year-ago profit, backed by strong demand for its solar panels in utility, commercial and residential projects. It has also raised its outlook given the strength across regions and end markets. Again, this well-known solar technology and energy services provider delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 123.11%.

Most of the U.S. states have renewable portfolio standards or at least have set targets for the future. This will ensure a steady uptake of solar power in the country. The high conversion capacity of SunPower’s solar panels will play a vital role in the U.S. solar industry.

The company expects a 10% reduction in operating expenses in its year-end 2013 results, which it expects to report on Feb 12. Again, the recent EU/China trade agreement will likely help boost prices that will make SunPower’s EMEA or Europe, the Middle East and Africa business more profitable. These initiatives will position SunPower well for meaningful earnings growth.

SunPower’s solar cells have one of the highest conversion efficiencies available for the mass market. Higher conversion efficiency has also led to improved silicon utilization. Management also hinted that capacity expansion is on the cards for 2014 to meet rising demand.

Other Stocks to Consider

SunPower currently holds a Zacks Rank #1 (Strong Buy). Other attractive stocks in the solar space include JinkoSolar Holding Co., Ltd. (JKS - Snapshot Report), First Solar Inc. (FSLR - Analyst Report) and SolarCity Corp. (SCTY - Snapshot Report). While JinkoSolar and First Solar sport a Zacks Rank #1 (Strong Buy), SolarCity carries a Zacks Rank #2 (Buy).

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