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Bear of the Day: SunPower (SPWR)

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There is plenty of room for expansion in the renewable energy industry, but many firms have struggled to find consistent profitability and growth. This causes uncertainty, and with uncertainty comes volatility. With this in mind, investors might consider avoiding SunPower Corporation (SPWR - Free Report) right now.

SunPower designs and manufactures high-efficiency silicon solar cells and solar panels based on an all-back contact cell design. SunPower's solar cells and panels generate electricity from sunlight for residential, commercial and remote power applications.

After the company’s Q4 report saw lower-than-expected revenues and shaky guidance, analysts have soured on SunPower’s near-term prospects, dragging the stock down to a Zacks Rank #5 (Strong Sell).

Latest Earnings and Outlook

SunPower reported its fourth-quarter results on Feb. 14. The company posted adjusted earnings of 25 cents per share, surpassing the Zacks Consensus Estimate of 18 cents. However, total revenues of $824 million missed our consensus estimate of $838 million. Revenues were also down about 24.9% from the year-ago period.

For the full fiscal year, SunPower generated adjusted revenues worth $2.13 billion, lagging our consensus estimate of $2.14 billion. On a year-over-year basis, full-year revenues fell 21.2%.

On a non-GAAP basis, the company expects adjusted revenues in the range of $300 to $350 million for first-quarter 2018. SunPower currently anticipates adjusted revenues for 2018 to lie in the range of $1.8 to $2.2 billion.

SunPower will also be affected by a recent import tariff on solar cells and modules imposed by the Trump administration. The company just announced plans to reduce its workforce by 3% due to the tariff. SunPower expects to incur restructuring charges of $20 million to $30 million.

Earnings Estimate Revisions

SunPower’s shaky outlook clearly has analysts worried. The company’s earnings estimates are trending downward, which is not a great sign for investors. While restructuring could help the company in the long run, it will likely bring short-term volatility to the stock.

Other Options

Luckily for investors interested in the solar industry, there are stronger options. Currently, SunRun Inc. (RUN - Free Report) is sporting a Zacks Rank #2 (Buy), while SolarEdge Technologies (SEDG - Free Report) has a Zacks Rank #1 (Strong Buy).

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

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In-Depth Zacks Research for the Tickers Above

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SunPower Corporation (SPWR) - free report >>

SolarEdge Technologies, Inc. (SEDG) - free report >>

Sunrun Inc. (RUN) - free report >>

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