SunPower Price Estimate Revised to $7.50 on Industry Outlook

by Trefis Team
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SunPower (NASDAQ:SPWR) released its Q1 results last week, posting a sequential drop in revenues in almost all major markets as demand for panels slowed down. Global panel sales are expected to show a yearly drop in 2012 as leading markets like Germany see a pullback in government subsidies. [1] SunPower is responding to the changing markets by focusing on its niche, high efficiency panels while taking steps to make itself more cost competitive. The company is facing strong competition from Chinese players like Suntech Power (NYSE:STP), which have responded to the downturn in the industry by aggressively cutting prices.

We have revised our price estimate for SunPower to about $7.50, a 30% premium to its current market price.

Click here for our full analysis of SunPower.

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Strategic focus shifting

SunPower is focusing on the residential and leasing segments in the American market, which was the biggest contributor of revenues in the last quarter. The company saw its sales decline in two of its three main geographical markets. Sales in the American market dropped to $367 million, registering a 28% drop over the previous quarter. Sales in Europe and the Middle East (EMEA) declined by 37%, while revenues from the Asia Pacific (APAC) region showed a modest 6% sequential increase. Margins in the EMEA region fell down to 2.2% in the quarter as low demand from countries like Germany factored into its performance. Margins in Americas and APAC stood at 16.5% and 14.5% respectively in Q1 2012.

Going forward, SunPower is focusing on reducing its manufacturing and operating costs to stay competitive in the low price market. While the company will continue to develop its industry leading high efficiency panels, it is also taking steps to reduce supply chain inefficiencies and make its manufacturing process more seamless.

The company announced the closure of one of its fabrication plants in the Philippines recently. SunPower is hoping that these changes will help reduce its cost of manufacturing panels to about $0.86/watt.

Financially, the company is also looking to shore up its balance sheet position by retiring some if its debt and shifting to a demand driven supply chain and improving inventory turns. We have revised our sales outlook for the company and updated our margin and cost estimates to arrive at our $7.45 price estimate for its stock.

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Notes:
  1. SunPower Reports First Quarter 2012 Results, MarketWatch, May 2012 []
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  • commented 2 years ago
  • tags: YGE FSLR SPWR STP
  • The problem with China is that they are far right wingnuts like ours.. China has to start moving toward the center .. I know that China is communist but they are listening to our far right wingnuts way too much... This is the real problem with China!! Communism and far right philosophy is too toxic poltically to make it work for both America and China!! China, start shedding your overdosage on the far right ideals coming from America.. Your view of America is too one sided... Please stop, China! This is politcal immaturity !! America doesnt really need to tell China how to manage its affairs but China is still too big a distraction for things to work more smoothly . China, you can start with your own solar rooftop installations.. China has to start eating what it cooks in the house.. We dont need you to ship solar panels across Pacific Ocean to America.. We will manage fine, thank you!
    SunPower Logo
  • commented 2 years ago
  • tags: YGE FSLR SPWR STP
  • China, you are also doing favors to our rich filthy Americans by dumping solar panesl below cost.. You have to stop that!! I am pulling my punches for now but I wont hesistate to use it if you dont start using your own solar panels!! you better start now!! I want you to be better trading partner than what I can see about you, China! Grow up, China!! Dick Nixon is dead and he is no longer the face of America!! I am no crook!!!!!!!!!!!!!
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  • commented 2 years ago
  • tags: YGE FSLR SPWR STP
  • Our own fiilthy rich homeowners living in huge McMansions dont really need tax credits to install solar on their huge roofs because they are already paying more for electricity than it costs to install solar on their roofs.. Big homeowners are paying the highest rates for electricity , maybe five times as high as the baseline rate for small customers who live in crampy condomiums or apartments.. Utilties typically charge different rates depending on how much electricity a customer uses every month starting from zero to a few hundred kilowatt-hours at maybe 10 to 15 cents . If you use more htan a few hundred kilowatthours liike a few thousand kilowatthours, you can pay as high as 50 to 75 cents each kilowatthour.. Solar rooftops costs less than the highest rates Mcmansion owners pay.. Yet, they want govenment tax credits , too. Dont allow the filithy rich be double dippers.. Public utiltiy commissions can and should hike prices for the highest rate users like Mcmansions until the owners wise up and stop sucking up to oil and gas companies!!
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  • commented 2 years ago
  • tags: YGE FSLR SPWR STP
  • China, I know that you lend tens of billons to your solar producers ... They are losing money yet they cut prices.. C'mon!! I know that you are out to destroy Sunpower and First Solar!! you are protecting Big Oil of the World by dumping solar on top of everybody's head!! China,, put your own solar panels on your own rooftops !! not ours!!
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  • commented 2 years ago
  • tags: YGE FSLR SPWR STP
  • There is one thing I cant understand about China solar producers.. They export every solar panel they make yet they rely on dirty coal for their own consumption... Why dont they put solar on their own roofs?? China is doing oil companies big favor by destroying our own solar producers!!! China, come clean !! Stop doing favors for dirty dishonest American companies !!!