SunPower (SPWR, Financial) is a fast-growing solar company based in the U.S. that is on track to deliver good growth. SunPower has a promising outlook as the company has succeeded in acquiring many large utility project orders in Europe, Middle East, Africa, Asia-Pacific and Latin America, besides strong order volume growth in the home market. Also, the demand for solar power is growing continuously worldwide; that makes the stock even more attractive as the company has high-efficiency solutions such as one-stop shop for residential, commercial and utility-scale power plant across all geographies and end channels that will drive its growth over the years.
A strong network is an advantage
SunPower has an extensive global dealer network of 1,800 dealers and strategic channel partners that provide unparalleled market footprint in 10 countries with minimal fixed cost and rapid scalability. Besides, SunPower enjoys the benefit of industry-leading technologies like the high efficiency Maxeon cell technology and its Oasis utility scale power block that makes the rooftop solar installation process much simpler and easier for residential as well as commercial owners, creating competitive edge over its peers like First Solar (FSLR, Financial) and SolarCity (SCTY, Financial). These technologies indeed avoid the headwinds of space constraint and are less costly compared with those provided by the other players in the solar market.
Also, according to a report by Goldman Sachs, installations in the U.S. rooftop solar market will grow at a rate of about 45% between 2013 and 2016, while utility-scale solar will grow at just 8% during the same period. This will of course create a handsome opportunity for SunPower to expand its share in the home as well as in the global solar market.
In addition, SunPower has witnessed a tremendous increase in its residential customers as the company facilitates up to 20-years lease contract, which of course is driving its residential leases revenue. Also, the company provides its customers a range of financing options. Moreover, the company not only gives its customers complete solar solutions but also monitors the performance of its offerings along with energy assurance products that should enhance customer’s ownership experience.
The company has entered into two lease financing agreements of late. The first lease contract is signed with Google (GOOG, Financial) for $ 250 million. This agreement is clearly a win-win for both, as Google gets to reduce its tax obligations by investing in clean energy while SunPower gets to gain more customers. The main focus for this deal will be to finance residential solar installation in the USA. The other one is its ITC-back-leveraged deal for $ 42 million with Hannon Armstrong.
Working on a sound strategy
Besides, the company is initiating various lines of attacks to market its products and services such as energy management and storage functionality to its DG offers to customers in global market that should become profit accretive to the company going forward. SunPower is also extending its leadership in commercial rooftop space as supplier of choice of Fortune 500 customers, along with public and federal sector institutions that will help the company to increase its share in the commercial rooftops as well.
Furthermore, SunPower has a strong pipeline under its belt as it has grown now to 7.5 gigawatts from 6 gigawatts last year as the company has added opportunities in all geographic regions. Also, the company was able to gain handsome share gain in the global market due to its strategic partnership with Total, Philippines-based Gas & Power company. SunPower has booked approximately 300 megawatts of booked projects due to this partnership and the company further expects to win many such projects in few promising emerging markets that should increase its profitability going forward.
SunPower is also increasing its presence in Japanese and Chinese markets. The company has witnessed strong growth in Japan. Also Japan accounted more than 22% of its total shipment as power plant solutions in Japan exceeded its supply. Also, SunPower has received a 70 megawatt C7 cell package order from a JV in China.
The company has experienced strong traction with its C7 concentrator technology, particularly in China, which is of course the world's largest PV market.
Examining the projects
SunPower has about 30 megawatts that are in progress in the U.S., and the company is planning to start installation on 2 projects, which has a total of 120 megawatts in China later this quarter that undeniably states great presence of the company in the Asian Market.
Additionally, the company is constructing its 350 megawatts Fab 4 facility as it plans to produce about 50 to 100 megawatts in 2015 and more than 250 megawatts in 2016. SunPower’s Fab 4 will produce its most efficient solar cells to date, leading to a reduction of up to 35% in panel costs. Besides, the strong and growing demand for its panels and pricing environment remains favorable to the company in the future should help the company to book handy projects and extends its market share in the global market.
Conclusion
SunPower currently trades at the trailing P/E of 27.11 and forward P/E of 24.33, with PEG ration is just 1.04 indicate potential growth for the company over the coming years. Also its profit and operating margin remain quite impressive with 8.40% and 10.05% return respectively. Also the company is cheap when compared to SolarCity. Besides the company is making a profit and has an impressive record of earnings per share growth. It has shown strong growth in its revenue and gross margin. Besides the analysts have estimated CAGR of 30.00%, double that of average industry CAGR of 15.70% for the next five years, reflect tremendous growth opportunity for the stock going forward.
