North Coast Solar Stocks

July 24, 2009

SunPower Soars 27% on Q2 Beat; Upgrades Galore

Filed under: FSLR, SPWR — Tags: , , , , — Jason @ 12:22 pm

Posted by Tiernan Ray
barrons.com

Price targets and estimates are going up today for SunPower (SPWRA, SPWRB) after the company last night easily beat estimates for its Q2 and raised the bottom end of the range for full-year revenue. The stock is soaring this morning, and has won at least a couple converts.

Dan Ries with Collins Stewart today raised the stock to “Hold” from “Sell,” writing that the company’s 76% jump in module sales (as opposed to full solar systems) enabled the company to lower inventory by $80 million and cut its inventory days nearly in half. “That reduces the inventory-related risk the company has faced since its inventory ballooned by $90 million in the first quarter” of 2009, writes Ries. Ries raised his estimates to $1.39 billion in sales this year, up from $1.34 billion, and raised his EPS estimate to 47 cents from 40. However, trading at more than 20 times his 2010 EPS estimate, he thinks the stock is a Hold.

FBR Capital’s Mehdi Hosseini raised his rating to “Outperform” from “Market Perform,” and raised his price target to $40 from $22. Although last night’s report was a “mixed bag,” he believes funding for cheaper roof-top installations of solar panels, as opposed to more extensive “ground-based” installations, “should be available and could actually get better in calendar year 2010,” and that this roof-top segment is SunPower’s “sweet spot.” Although Hosseini has been cautious in past on solar system and module makers, “we now believe the rooftop segment, especially in the U.S.” Hosseini thinks SunPower will be a better investment than First Solar (FSLR), which is focused on ground-based installations, he writes.

Ramesh Misra with Brigantine Advisors writes this morning that after several negative pre-announcements from solar peers, the SunPower results were a definite surprise. SunPower has higher exposure than others to the U.S. solar market, and he believes the company’s technology “will be regarded in a more positive light, especially in the sunny regions that are seeing the fastest rate of solar deployment.” Misra raised his Q3 estimate to $410 million and 42 cents per share from $304 million and 30 cents, and up’d his full-year view to $1.4 billion and $1.25. His 2010 estimate goes to $2.2 billion and $2.42 per share from $1.8 billion and $2.10. Misra raised his price target to $36 from $32 while maintaining a “Buy” rating.

Caris & Co. analyst Ben Pang raised his price target to $33 while maintaining his “Above Average” rating. Pang emphasized management’s comments that the company sees “very strong potential” in California and and other U.S. markets and that it expects to capitalize on that potential. Pang thinks SunPower’s brand is a “key advantage” in the U.S. and thnks the company will solidify its status in the country “over the next 18 months.” Pang’s Fiscal 2009 estimate goes to $1.46 billion and $1.21 per share, from $1.41 billion and $1.35 per share, while his 2010 estimates go to $2.4 billion and $3 per share from $2.23 billion and $2.69 per share.

Spoiling the party, Pacific Crest’s Mark Bachman writes in a note today that he doesn’t believe the forecast given that his own research suggests the company is losing market share in selling components of solar panels. He’s not happy, either, that a 4.5 percentage point decline in gross profit margin was “glossed over on the [conference] call,” in his words. Further, Bachman believes the company’s forecast of $670 million this year for its solar panel systems business is dependent on selling 100 megawatts of production, but he believes the company is far from securing that much business. Bachman nevertheless raised his estimates to $1.4 billion for this year, up from $1.39 billion, and raised his earnings projection from $1.05 to $1.17 per share. He maintains a rating of “Sector Perform” on the stock and believes the stock is fairly valued today.

Sunpower shares today are up $6.14, or 25%, at $30.99. First Solar shares are up $13.87, or 9%, at $171.65. Other solar shares are rising sharply as well.

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