Oppenheimer Says Buy SunPower With Solar Vendors Acting More Rationally
Oppenheimer upgraded solar energy company SunPower (SPWR) to Outperform from Perform, saying that the stock prices in "challenging conditions," while the company's fourth quarter revenue was "strong" and its gross margins should rise this year.
RESULTS: After the close last night, SunPower reported a fourth quarter adjusted loss of (64c) per share, versus the consensus forecast for a loss of (45c) per share. The company reported Q4 adjusted revenue of $1.097B, versus consensus that stood at $1.06B. SunPower also backed its FY17 adjusted revenue view of $2.1B-$2.6B, versus the consensus forecast of $2.41B.
POSITIVE ATTRIBUTES: SunPower's Q4 revenue, which came in slightly above expectations, was "strong," wrote Oppenheimer analyst Colin Rusch, adding that the company reiterated its 2017 guidance. SunPower's margins should be boosted by the company's new P-series solar panels and its gross margins should rise throughout this year, Rusch stated. Although price competition among solar equipment vendors will continue, SunPower will benefit from its technological innovation, as well as its "global footprint and trusted brand," the analyst stated.
SOLAR SECTOR OUTLOOK: Solar vendors are acting more rationally now than at any time in the last decade, Rusch stated. Starting next quarter, rationalization efforts undertaken by the industry should start to impact the sector's results, Rusch predicted. However, he admits that solar cycle bottoms are difficult to call.
TARGET: The analyst set a $10 price target on SunPower.
OTHERS TO WATCH: Other publicly traded companies in the space include Canadian Solar (CSIQ), First Solar (FSLR), JA Solar (JASO), SunEdison (SUNEQ), Trina Solar (TSL) and Yingli Green Energy (YGE).
PRICE ACTION: In morning trading, SunPower shares have fallen about 9.5% to $6.57 per share.
Disclosure: None.