Sunpower Shines Bright

Here is some more good news. SunPower (SPWR) announced impressive Q3 earnings last week. With revenues of $377.5 million, the company exceeded the market’s expectations of $350 million, and reported annual growth of 61%. Its EPS grew 82% to $0.60 and beat the Street’s view of $0.56.

During the quarter, the Component segment contributed $184.2 million to revenues, representing 64% sequential growth and 140% growth over the year. The Systems segment grew 22% over the year to $193.3 million and accounted for 51% of revenues.

SunPower attributed its exceptional performance to lower polysilicon costs, higher conversion efficiencies, improved silicon utilization, steel efficiencies at higher production volumes, and modestly higher average selling prices.

During the quarter, the company saw significant increase in interest in the U.S. The company completed 10 megawatts of large-scale commercial projects for Applied Materials, Agilent, Toyota, California Academy of Sciences, and the U.S. Department of Energy. The company entered the utility scale PV market with Florida Power & Light and PG&E announcements through its ability to deliver solar power at a price competitive with other sources of energy.

SunPower continued with its strategies of vertical integration, geographical, and product diversification.

For Q4, the company gave a revenue outlook of $405-$435 million with EPS of $0.73-$0.80 and raised its guidance for the year to $1.44-$1.46 billion with EPS of $2.34-$2.41. For 2009, the company is expecting revenues of $2.05-$2.15 billion with EPS of at least $3.50.

The company is confident of achieving these numbers due to its continuously reducing input costs and improving silicon utilization and conversion efficiencies. The company also sees the passing of the Investment Tax Credit as an opportunity that “creates a long-term scalable commercial market, brings in the utilities and creates a countrywide residential market.”

The stock had slipped to a 52-week low of $37.10 earlier this month. However, it has since recovered to $54.00. I maintain a Buy rating on this stock on a long-term basis. Even though oil prices have fallen substantially in the past few weeks, the environmental awareness and the green movement is here to stay, regardless of which presidential candidate wins the November elections. In fact, both candidates are committed to a greener world economy. In addition, costs are falling at a good pace such that grid parity may come sooner than 2013, the previously forecasted timeframe, potentially eliminating the need for a lot of subsidies sooner than we thought.

Disclosure: None

Comments

[Road Runner:]

Let’s not lose perspective on oil prices. It "feels" like we are back to cheap oil with the current price around $70/barrel, from $147/barrel. This may lead us to "feel" like there will be a less interest in alternate energy, especially currently expensive solar. However, oil is still historically expensive. Oil has been above $50/barrel for only the last 4 years. Just 5 years ago, oil was $27/barrel (singing in the streets).

We are not going back to sub $50/barrel oil because of increasing demand in emerging markets, limited supply (peak oil), and higher cost to produce the “last barrel”. Thus, in-my-opinion, there will continue to be plenty of interest in alternate energy including solar.

Note about the “last barrel”. It doesn’t matter that Saudi Arabia can produce oil at $7/barrel. What matters is the highest cost for producing a barrel. That is where the supply and demand curves cross. If the price of oil drops below the cost of the “last barrel”, that barrel will not be produced which will limit supply and push prices back up.

www.gasbuddy.com/gb_re... Check “Show Crude Oil Price”.

2008 Oct 22 09:50 AM