SunPower Sells Italian Project

SunPower Corporation (SPWRA) completed the sale of a 13 MW Solare Roma solar power plant to Allianz Renewable Energy Partners IV Ltd., a wholly-owned subsidiary of Allianz AG (AZ). The 13-MW Solare Roma power plant is located in the municipality of Anguillara, Province of Rome, Lazio region, Italy. SunPower had designed and built the solar power plant and will continue to provide ongoing operations and maintenance services for the new owner.

SunPower’s customer base is spread across North America, Europe, the Middle East, Asia and Australia. The company is proactive in entering new markets. Apart from a sizeable presence in the US, it is already focusing on improving market share in Spain and Germany, while gaining new market share in emerging markets like Italy, Australia, France, Japan and Greece.

SunPower is also increasing its presence within the residential and commercial markets by expanding its network of dealers globally. By fiscal-end 2011 the company expects its global dealer network to almost double to around 2,000 dealers. Finally, by steering clear of long-term contracts for sales through its dealer network, the company gears up for growth in its margins with the help of some short-term upswing in the solar market.

SunPower Corporation designs, develops, manufactures, markets and sells high-performance solar electric power technology products, systems and services worldwide for residential, commercial and utility-scale power plant customers. The company’s semiconductor-based solar cells and solar panels, which convert sunlight into electricity, are manufactured using proprietary processes and technologies.

Over the longer-term however, we are bullish on SunPower with an Outperform recommendation, given its diversified channel strategy with a strong presence in the residential and commercial market, along with its status as a conversion efficiency leader. The company also has a steadfast focus on spreading out its revenue stream by climbing the solar value chain. Going forward the company will reap the benefit of its low cost manufacturing base, which should improve further with the completion of its Malaysian JV.

Over the near term, the stock is trading at a premium valuation compared to its peers, which is unwarranted given an oversupply of solar panels in the market resulting in lower ASPs, subsidy roll back risk in Europe, rising competition, financial stability of its customers and foreign exchange risk. SunPower currently has a short term Zacks #3 Rank (Hold). We maintain our Neutral recommendation on SunPower shares.

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