SunPower (SPWR, Financial) recently released results for the second quarter. The company’s revenue fell slightly, but it beat the consensus estimates on both the top line and the bottom line. The stock had been impressive on the stock market after a robust performance in the first quarter, but shares of SunPower are tumbling on the back of a weak guidance for the third quarter. Management, however, is satisfied with the performance and is working on various initiatives to get better. With the future looking bright and various cost-cutting initiatives in tow, SunPower’s moves will be exciting to watch.
How is SunPower performing?
SunPower’s quarterly revenue fell by 4.4% to $621.1 million. However, the company’s revenue fell, but it still beat the consensus estimates of $596 million. The company on the other hand also posted EPS of $0.28 per share which also beat the analysts’ estimates. The analysts were expecting $0.25 per share.
SunPower posted good results for the second quarter. The results were good as it came beating the company’s own expectations as well as analysts’ estimates. However, on a comparative note SunPower failed to meet the performance it delivered in the first quarter. Still, good financial results reflected solid execution as well as strong demand for its industry-leading, high efficiency solar systems across all channels and geographic segments. By leveraging its vertically integrated value chain from upstream to customer, SunPower is competitive with traditional generation in many markets.
Can SunPower improve?
SunPower, on the other hand, is focusing on many initiatives to improve its profit margins in the future. The company is making significant moves to reduce its costs with the rampup of its next generation technology and processes. Besides this, SunPower is focusing on expanding its cell efficiency leadership by lowering the manufacturing costs and increasing the capacity to meet robust demands that it is seeing for its solutions.
SunPower is seeing good growth in its residential business. It is expecting good performance from this segment on the back of 2 financing agreements it signed in the first quarter. With the agreement with Hannon Armstrong, SunPower is expecting to drive positive cash flows for its leases. The company is also focused on further improving its financial flexibility for its customers. For this SunPower has announced a $200 million solar loan agreement with Admirals Bank. All these moves seem concrete and can help SunPower in a better way.
SunPower is also pleased with its performance in the international market. The company is seeing good performance by its storage pilot in Australia. Seeing the robust growth and strong prospects, it is planning to expand the storage to the commercial channel in this market next year. Another important fact for the growth of the company is that SunPower is now selected among multiple industry-leading global automotive companies as their exclusive solar provider to its U.S. customers.
Strong prospects
SunPower has strong prospects for the future. Its upstream position seems to be very strong. SunPower is making moves to drive growth in the cell and the panel efficiency at reduced costs. Also, SunPower will extend its cell lead with average solar cell efficiency from some of the best production line increasing significantly through 2016. These facts clearly indicate that the company can also prove to be a strong long-term holding as its prospects looks promising.
SunPower is keeping its eyes on its global power plant business. Its Solar Star Project, which is nearing its completion, is comprised of the world’s largest PV system. Also, the thing that makes SunPower distinct is its Oasis power block product which will lead the increase in energy production by decreasing BOS costs. SunPower is also engaging its Greenbotics acquisition at Solar Star. It is expected that SunPower can clean the panel with a three times more speed than traditional methods by using the robotics technology of Greenbotics. This will also reduce water usage by 90%.
Moving on, China is one of the largest and fastest-growing solar markets in the world. SunPower is pleased with the traction that it is seeing with its C7 concentrator technology in China. Seeing the growing traction, SunPower is expanding its partnership with the TZ Group to other regions in China. SunPower is also seeing significant opportunities in this market with the pipeline of approx 1 gigawatt.
Conclusion
With a trailing P/E of 25.03, SunPower looks reasonable since its operational execution is improving and it has many initiatives which are expected to prove a growth driver for it in future. In addition, its forward P/E of 21.42 indicates that its earnings are also growing at a good pace. The catchiest thing about the stock is that its earnings are expected to grow by 30.00% in the next five years nearly doubling the industry average. Considering all these facts, in my opinion SunPower is good pick as it has got much steam both for short term and long term.
