Shares of SunPower (SPWRA) began diving yesterday even before the earnings announcement was made. The reason for the selling became apparent a few hours later as the company posted worse than expected preliminary results. The company now expects lower gross margins and a wide loss on the quarter due to tough conditions in Germany and Italy. Now the company expects gross margins to come in at 12-13% vs the previous estimate for 15-17% and as a result a much larger loss of 0.19-0.20/share vs the previous estimate for a smaller loss of 0.05/share to a possible gain of up to 0.10/share.
Said Tom Werner, SunPower president and CEO:
While we met our revenue goals for the second quarter, our gross margin and bottom line performance was impacted by market conditions in Germany and Italy. Despite these challenges, we successfully reduced inventory quarter over quarter and have begun the process of cancelling above-market third-party cell contracts. In addition, we continue to execute on our accelerated cost reduction roadmap and are ahead of our original plan. With the closure of the Total (NYSE:TOT) transaction, we commenced negotiations with banks to effectively utilize our $1 billion credit support agreement and expect to enter into new and more flexible credit facilities shortly. With continued strong demand for our high-efficiency systems and our partnership with Total, we are poised to gain share profitably.
The results have brought on a series of downgrades in the stock, but it should be noted that shares are holding up quite well, down a couple more percent today but holding above support of the 50-day moving average. On the daily chart, shares of SPWRA remain in a bullish setup ... for now. Let’s keep in mind that the Germany and Italy concerns have been expressed for quite a few months now and much of that has been built into solar stocks. SunPower discussed the Europe issues in its last earnings report. I still believe that once earnings season is over for solar stocks, it’s going to be time to look for entry points on these beaten down stocks.