2024-03-13 07:55:04 ET
Summary
- SunPower Corporation has experienced a huge decline in its share price following the significant restructuring in its business.
- The company now focuses on the residential segment, offering photovoltaic and storage systems through direct sale, leasing, or loans.
- Given the unscalable and competitive business, as well as the negative profitability expected in the next two years, I currently rate SPWR as a Sell.
SunPower Corporation ( SPWR ) is together with Sunrun ( RUN ) and Sunnova ( NOVA ) one of the leading suppliers and installers of distributed photovoltaic systems in the United States. Since January 2021, the share price experienced a steady decline, and in the meantime, SPWR has significantly restructured its business. As I think was clear from my previous Sunnova's article , I am not particularly attracted to this segment of the solar industry, as it is characterized by high installation and maintenance costs, difficulty in building a scalable business, and high initial capital requirements. Moreover, SunPower appears to me to be an early-stage company, which has sold all its most valuable assets and now wants to focus only on the residential segment. It indeed now directly or indirectly installs photovoltaic and storage systems for individuals, offering them through direct sale, leasing, or loans. In my view, the poor financial results reported, and the stringent competition may further weigh on the long-term results. Nonetheless, in the short term, management presented a plan in the conference call to reduce operating costs by about $100m. The decrease in the price of solar panels and energy storage systems, in addition to the tax credit introduced by the Inflation Reduction Act may be additional positive factors to support the financial results in the next 2 years. However, I believe this will not be enough to reach a profit, especially considering the increasingly strong competition from China, thus I currently rate the stock as a Sell....
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For further details see:
SunPower: Major Difficulties For An Unscalable Business