SunPower Corp. (SPWR - Free Report) recently announced that its long-term partner Tianjin Zhonghuan Semiconductor secured a key regulatory approval from China's State Administration for Market Regulation. The approval comes as a progress on the planned spin-off of SunPower’s manufacturing operations to form Maxeon Solar Technologies. SunPower expects to complete the planned company split by the end of June 2020.
In November 2019, SunPower made the initial announcement of splitting its operations to form two different entities and creating Maxeon Solar Technologies with the help of a $298-million investment by its long-term partner Tianjin Zhonghuan Semiconductor.
Rationale Behind the Planned Spin-off
The global solar industry is poised to witness a period of extended growth, led by the rapidly growing opportunities for solar energy. Per a report by the International Renewable Energy Agency (IRENA), global electricity generation from solar energy is expected to increase to nearly 360 GW per year by 2050 from the current level of 109 GW.
With the spin-off deal, SunPower aims at becoming a pure-play distributed generation (DG) energy services company. With the largest installed base in the U.S. residential and commercial market, and more than 500 channel partners in a leadership position in new homes and commercial direct, new SunPower is forecasted to be the largest North American downstream DG solar pure play.
This transaction will also allow the company to accelerate investments in critical initiatives to increase profitability, including storage expansion and service offerings in both residential and commercial markets as well as digital products. This will aid in lowering customer acquisition costs and improving customer satisfaction.
Plan of Actions Post the Spin-Off
Post the spin-off, both SunPower and Maxeon Solar will look forward to shifting focus and expertise to their core strengths in their respective markets around the world. Per a report by Zackin Publications, SunPower will focus on product innovation and down streaming of high-efficiency solar systems, and provide high-growth storage and energy services.
Maxeon Solar will focus on bringing panel technology to a high-volume scale. It will market its high-efficiency solar panels under the SunPower brand in the global marketplace. Maxeon Solar will own and operate solar cell and panel manufacturing facilities located in France, Malaysia, Mexico and the Philippines. It will also maintain its research and development, marketing and sales footprint outside of the United States and Canada.
In a year's time, shares of SunPower have declined 9.3% against the industry’s 36.3% growth.
Zacks Rank & Key Picks
SunPower currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the same sector are Canadian Solar Inc. (CSIQ - Free Report) , Enphase Energy, Inc. (ENPH - Free Report) and CNX Resources Corporation (CNX - Free Report) , each carrying a Zacks Rank #2 (Buy).
Canadian Solar delivered a four-quarter earnings beat of 83.24%, on average. The Zacks Consensus Estimate for 2021 earnings has moved 15.8% north to $3.07 per share over the past 90 days.
Enphase Energy delivered a four-quarter earnings beat of 23.85%, on average. The Zacks Consensus Estimate for 2020 earnings has moved 1% north to $1.02 per share over the past 90 days.
CNX Resources delivered a four-quarter earnings beat of 111.52%, on average. The Zacks Consensus Estimate for 2020 earnings has moved 35.3% north to 23 cents per share over the past 90 days.
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