Why SunPower Finally Looks Safe for Investors Again

Energy

Published: September 19, 2018 10:40 am

Last Updated: January 11, 2020 5:40 pm

SunPower Corp. (NASDAQ: SPWR) had been having a tough year, along with many other companies that are tied to solar energy. It seems that even in alternative energy nothing lasts forever. But Tuesday brought on large gains after SunPower said that several of its products were not going to be included in the U.S. tariffs.

Credit Suisse raised SunPower to Outperform from Neutral and raised the target price to $10 from $8. Basically, the firm believes that near-term tariff overhang is removed and the company is on course to exit noncore asset sales, delever and pivot to higher margin and less capital intensive next-generation technology (NGT) modules and distributed generation markets.

Credit Suisse said in the report that SunPower received the much-awaited exemption from U.S. import tariffs for its interdigitated back contact (IBC series) solar modules manufactured in Malaysia. The firm doesn’t expect any impact on 2018 earnings as the decision doesn’t explicitly call out retroactiveness, and as the company has likely imported module needs for 2018.

Specifically, the brokerage firm said:

We expect 2019 and 2020 gross profit to benefit $35-40m/yr vs our prior estimates due to lower tariffs as majority of US needs would be met by the 800-MW IBC manufacturing facility in Malaysia, and new 500-MW US factory acquired from SolarWorld…

We increase our 2019/2020 EPS estimates to $0.01/$0.07 (from – $0.21/-$0.09) due to lower than expected import tariffs in the US market. Risks include US trade uncertainty, cost targets, state policies, oversupply, and pricing pressure.

A couple of other analysts weighed in on SunPower as well:

Robert Baird reiterated a Neutral rating and raised its price target to $9 from $7.
JPMorgan reiterated a Hold rating with a $9 price target.

Shares of SunPower were last seen up about 2% at $7.71 on Wednesday, with a consensus analyst price target of $8.12 and a 52-week trading range of $6.36 to $10.00.