Morgan Stanley ‘Cautious’ on Solar Industry, SunPower

In a research update published Thursday morning, analysts at Morgan Stanley weighed in on the SunPower Corp. (NASDAQ: SPWR) restructuring plan the company offered on Wednesday.

SunPower said it would close 700 megawatts of manufacturing capacity and reduce its global workforce by 25% (around 2,500). The factory that is being closed is in the Philippines and employs about 1,900 workers. The other 600 or so to lose their jobs will come from the company’s corporate division according to a report at pv magazine.

The company also offered fiscal year 2017 guidance that Morgan Stanley said was below consensus, but inline with the analysts’ own estimates:

SunPower posted 2017 non-GAAP revenue guidance of $2.1-2.6b, below our $2.59b estimate and the $2.7b consensus. The deployed MW target of 1.3-1.6 GW was in-line with our 1.45 GW estimate. … Notably SPWR did not provide margin or EBITDA targets for 2017, and management noted its focus will be on maximizing cash flow and liquidity as opposed to growth and EBITDA levels.

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Morgan Stanley said it remains cautious on the outlook for 2017 given limited indications of a solar PV industry recovery:

On the positive side, SPWR noted that the 4Q16 slowdown it was experiencing in the US residential and commercial rooftop market had corrected,and the company expects rooftop market growth in 2017. Regarding industry oversupply, management noted there may be some net reduction in capacity in China as producers shift to mono c-Si manufacturing from multi c-Si products, but declines so far seem to have been modest. As we outlined in our recent outlook note, industry oversupply, module price declines, utility-scale system volume weakness,and PPA [purchase power agreements] competition remain key concerns. Execution risk remains high for 2017,and we remain comfortable with our EW rating.

The analysts rate SunPower at Equal Weight with a price target of $6.00. Shares traded down about 4% Thursday at $7.54 in a 52-week range of $6.00 to $31.10. The consensus price target on the stock is $12.34.

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