With shares of SunPower Corporation (NASDAQ:SPWR) trading at around $15.18, is SPWR an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock's Movement
SunPower has seen a lot of volatility lately. This has a lot to do with SunPower being one of the top players in a weak industry. Many longs like the company, and many shorts hate the industry. Let's take a look at some positives and negatives for SunPower.
Positives:
Most efficient solar panels in industry (residential) Strong performance from rooftop and ground mount teams Consistently improving revenues on an annual basis Strong revenue growth in Americas and Asia-Pacific Gross margin expansion Improved cash flow Increased demand Residential lease growth Cost structure improvements Analysts like the stock (kind of): 4 Buy, 11 Hold, 3 SellNegatives:
Consistent losses Revenue declines in Europe, Middle East, and Africa Increased competition Foreign exchange risksNow let's take a look at some numbers. The chart below compares fundamentals for SunPower, First Solar (NASDAQ:FSLR), and Trina Solar (TSLR). SunPower has a market cap of $1.81 billion, First Solar has a market cap of $3.79 billion, and Trina Solar has a market cap of $387.69 million.
| SPWR | FSLR | TSL | |
| Trailing P/E | N/A | N/A | N/A |
| Forward P/E | 26.65 | 13.36 | N/A |
| Profit Margin | -12.98% | -2.86% | -20.56% |
| ROE | -31.00% | -2.66% | -26.30% |
| Operating Cash Flow | $316.47 Million | $762.21 Million | -$178.20 Million |
| Dividend Yield | N/A | N/A | N/A |
| Short Position | N/A | 36.10% | N/A |
Let's take a look at some more important numbers prior to forming an opinion on this stock.
E = Equity to Debt Ratio Is Normal
The debt-to-equity ratio for SunPower is weaker than the industry average of 0.40, but it still qualifies as normal.
| Debt-To-Equity | Cash | Long-Term Debt | |
| SPWR | 0.72 | $506.60 Million | $676.43 Million |
| FSLR | 0.16 | $1.00 Billion | $563.04 Million |
| TSL | 1.56 | $807.28 Million | $1.37 Billion |
T = Technicals Are Strong
SunPower has been one of the hottest stocks throughout the broader market so far this year.
| 1 Month | Year-To-Date | 1 Year | 3 Year | |
| SPWR | 61.21% | 169.90% | 169.00% | 2.85% |
| FSLR | 63.69% | 40.27% | 155.50% | -64.59% |
| TSL | 36.41% | 12.21% | -37.16% | -75.42% |
At $15.18, SunPower is trading above all its averages.
| 50-Day SMA | 11.75 |
| 100-Day SMA | 9.81 |
| 200-Day SMA | 7.14 |
E = Earnings Have Been Weak
Earnings have been unimpressive over the past two years. However, revenue has slowly but steadily improved.
| 2008 | 2009 | 2010 | 2011 | 2012 | |
| Revenue ($)in billions | 1.44 | 1.52 | 2.22 | 2.37 | 2.42 |
| Diluted EPS ($) | 1.05 | 0.35 | 1.75 | -6.28 | -3.01 |
When we look at the last quarter on a year-over-year basis, we see an increase in revenue and a decline in earnings.
| 3/2012 | 6/2012 | 9/2012 | 12/2012 | 3/2013 | |
| Revenue ($)in millions | 494.13 | 595.90 | 648.95 | 678.52 | 635.43 |
| Diluted EPS ($) | -0.67 | -0.71 | -0.41 | -1.22 | -0.46 |
Now let's take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?
T = Trends Do Not Support the Industry
With a solar panel glut, decreased average selling prices, and substantial weakness in Europe, trends don't support the industry. However, it's no secret that solar should eventually succeed. It's just a matter of how eventual that will be.
Conclusion
SunPower has enormous potential, and it's always good to be ahead of the curve, but there are substantial risks, especially considering that the stock market is at all-time highs, and the Bernake will eventually have to unwind monetary stimulus and raise in interest rates. When this occurs, there won't be a flight to solar stocks.
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