Sunpower Seems Unreasonably Slaughtered

Sunpower’s (SPWR) Q4 stock performance has been scary as the company’s stock reached heights of $160/share in intraday trading and then plummeted on general market madness and company outlook to $73/share recently. It is worth looking at the company to see what has been going on.

Sunpower reported Q1 2008 revenue of $224.3 million and GAAP earnings of $4.9 million. System revenue contributed 55% of sales and components provided 45%. System revenue however dropped 21.4% versus Q3 ($123.9 million vs. $157.7 million) due to close out of an Air Force base project. Despite a 201% increase in sales (versus $74.5 million a year ago), net revenue and EPS were both down 42.2% versus a year ago at $8.4 million. This performance also compared poorly to the prior quarter’s results of sales revenue of $234.3 million. Analysts expected sales of $220.6 million. However, in the solar business, winter is not when people focus on building out their solar panels, so the seasonality should be expected. Also, in Q4 company finished acquiring Solar Solutions in Italy, opening up more international channels.

Sunpower gave guidance of revenue between $230-250 million for the next quarter. The company also raised full year guidance for 2008 at $1.2 -1.3 billion or an EPS between $1.17-1.27 per share, representing a 40-50% growth in sales. In comparison, Wall Street wanted $1.9 billion for the year. Wall Street wants a lot of things that are unreasonable, I must say!

Anyway, the earnings report had a ripple effect on Sunpower’s owner, Cypress Semiconductor, which fell hard as the chipmaker’s shares dropped 6.7%. Cypress owns 44.5 million shares, totaling a 53.1% stake in the solar energy company.

I still think SunPower is a very good company. It’s Polysilicon resources are secure. There is some talk that the issue is oversupply in 2008. SunPower has insulation since it controls its own vertical chain through long-term contracts.

I don’t expect the housing crisis to have huge impact on SunPower. SunPower’s takers have been in the high-end, and that segment should not be affected by the subprime debacle at the low-end of the housing market. Also, companies like Macy’s, Walmart, and Morgan Stanley are purchasing product for their new facilities, and would continue to do so. Growth overseas in countries like Spain, Germany, Japan, and now Italy should also continue just fine.