Oil at $127, Buy Sunpower

Sunpower’s (SPWR) strategy on tying up with PolySilicon vendors seems to be getting it the expected results as is evident from its recently announced Q1 results and future outlook.

Q1 2008 revenue was $273.7 million, recording a 22% sequential increase and 92% annual increase. The market was expecting revenue of $245.2 million. The Components segment accounted for 35% and the Systems segment accounted for 65% of the revenue.

The company's foothold in the European market strengthened with revenue contribution increasing from 51% the year before to 70% in the current quarter. Its U.S. share of revenues slipped from 39% to 22% and the Rest of the World contributed 8% compared to 10% the year before. Germany is one of the most advanced markets for Solar Energy uptake, and SunPower has traditionally been very strong there.

For fiscal 2008 the company raised its guidance of revenue to $1.3-$1.375 billion with Non GAAP EPS of $2.10-$2.20. The company expects the market to grow by 40% during the year 2009 and see themselves as growing by more than 40% as the company expands its market share.

SunPower is taking a unique approach to tapping the market. It is the only ones who have focused on the customer, the customer experience, and the channel to the customer. Its technological leadership is evident from the facts that almost half of cell production in the quarter was Gen2 solar cell technology with a minimum conversion efficiency of 22% and the company is also migrating to a thinner 145 micron wafer technology.

SunPower brought to the market a new architecture which resulted in a conversion efficiency of 20%. Today, it is talking of 22% efficiency of power conversion thus retaining its position as world leaders in the highest efficiency solar products.

Strategies of vertical integration, broad and differentiated product offerings and its regional mix as the company expands in Italy and enter into partnerships in China will stand them in good stead.

Despite the performance, the stock slipped 13% from its previous day to $86.80 on the announcement of its results. On Wednesday, however, SPWR was trading at $94-$96. With oil at $127 a barrel, SunPower still has a long climb up, and I plan to hold on to the stock for the long term.

Additionally, there is a Bill in the House this week which is supposed to approve subsidies for renewable energy that will most likely get approved, blowing more wind into SunPower’s sails.

click to enlarge

Disclosure: The author owns SPWR.

Comments

[EnergyFinan...:]

If you're interested in SunPower, you should check out the Renewable Energy Finance Forum-Wall Street (), held June 18-19 in New York City. The CEO of SunPower, Thomas Werner, will join the CEOs of First Solar, LDK Solar, and Applied Materials in a discussion about the future of the photovoltaics industry. Other topics for discussion at the event include solar thermal, wind energy, biofuels, carbon finance, the role of venture capital, and more.

2008 May 15 11:16 AM

[Shoreline_CT:]

I bought 24 SPR-215 panels for my PV system. Couldn't be happier with the performance and the 25 yr warranty. Picked them because of the high efficiency rating.

2008 May 15 02:26 PM

[supershort:]

"Despite the performance, the stock slipped 13% from its previous day to $86.80 on the announcement of its results. On Wednesday, however, SPWR was trading at $94-$96. With oil at $127 a barrel, SunPower still has a long climb up, and I plan to hold on to the stock for the long term. "


The price of oil has nothing to do with the increased use of solar power. Oil is used less than 5% to produce electricity. Coal and nat gas are the majority of fuels used.

On the contrary, these systems are very expensive and SPWR which is counting on the individual to buy these panels will be haindered by the inflationary effects of high oil. Bear in mind that the housing market is is a severe downturn and will be for quite some time. People and contractors will not install systems that will cost them on average 20k and will not see any cost savings for 20 years.

2008 May 15 02:41 PM

[tessant:]

man, STP really gets no love around here.

-Scott
solarfeeds

2008 May 15 03:36 PM

[Jack Yetiv:]

To the author:

What is your source that more than 1/2 of production panels are at 22% efficiency?

When I recently looked on the SPWR website, the best efficiency of the production panels was 19.3%--still a great number but miles away from 22%.

I believe they are making 22% in the lab, but those panels won't hit the market until 2010.

Also, SPWR is waaay overpriced. TSL is a far better value, and even CSIQ after its recent run is a better value.

Jack Yetiv

2008 May 15 08:12 PM

[globalmacro:]

Suntech over Sunpower all day long. And then tomorrow too.

2008 May 15 10:03 PM

[buyforeclos...:]

I am in YGE and was in SOL...truthfully its all spec at this point as I think if oil goes under 110 they all tank..and all of you who say it isnt tied to oil..your wrong. One week does not not indicate anything and your really way ahead of yourselves on that call.

2008 May 16 11:21 AM

[supershort:]

Buyforclosures,

Alt energy may be tied to oil, for the uninformed, and it will be those that get hurt as they may be making gains, but for the wrong reasons.

US fossil fuels for electricity (roughly):
50% coal
19% natgas
19% nuke
9% renewables and oil.

Oil does not directly impact the price of electricity, nor will it bring "grid parity."

I still don't understand why this bloated pig hasn't imploded yet though. Holding my shorts and puts patiently.

2008 May 17 01:14 PM