Why Has SunPower’s Stock Already Tripled This Year?

by Trefis Team
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SunPower
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SunPower (NASDAQ: SPWR) manufactures and distributes solar power products for installation on residential and commercial units as well as large-scale, utility-sized projects. 2019 has been a great year so far for SunPower, with its stock almost tripling in value, from $5.07 in January to $14.50 in September.

View our interactive dashboard analysis A Look At Why SunPower Has Already Tripled So Far This Year, where we analyze the factors behind this move in SunPower’s stock and what to expect in the near future.

 

It Has Been A Good Year For The Solar Sector Overall

  • Solar stocks have had a great year so far, as can be seen from the Invesco solar index, which has jumped from $18.79 in January to $31.14 in September, a 66% move.
  • Solar stocks have benefited from strong international demand growth, favorable policy changes, and healthier fundamentals, which  have contributed to an overall positive industry sentiment.

A Look At SunPower’s Revenue Trend Over Recent Quarters

  • Broadly, SunPower’s revenue has grown from $398.9 million in Q1 ’18 to $481.9 million in Q2 ’19, which is a quarterly compounded growth of 3.85%.
  • The QoQ drop in revenue for Q1 ’19 was due to the transition to the new, more efficient A-series panels, whose sales have been rapidly picking up since.

Improvement In The SunPower Technologies Segment

  • The segment involves technology development, panel manufacturing, and equipment sales to end-customers outside North America.
  • SunPower had been underperforming in the utility-scale projects space due to competition from independent power producers and smaller players.
  • The company ceased development of large-scale solar power projects in Q3 ’18, selling its remaining power plant development portfolio.
  • This segment had been expected to struggle since, but revenues have picked up as the company has rapidly transitioned from a development model to an end-to-end solutions model, driving revenue to $226.5 million in Q2 ’19, from $164.1 million in Q3 ’18.

Revenue And EBITDA Beat Guidance In Q1 And Q2 2019

  • Revenue and EBITDA numbers beat company guidance for both Q1 and Q2 ’19.
  • Revenue in Q1 ’19 was $411.6 million vs $370 million guidance, and revenue in Q2 ’19 was $481.9 million vs $444 million guidance.
  • Similarly EBITDA for Q1 came in at -23 million vs -30 million and for Q2, 8 million vs 5 million guidance.
  • These numbers helped create a positive outlook, and the company sees similar growth going forward.

MW Shipped And Total Capacity Have Grown, With High-Margin A-Series Panels Likely To Account For Higher Mix Of Sales

  • The number of MegaWatts (MW) shipped has nearly doubled over the last 6 quarters, going from 326 MW in Q1 ’18 to 637 MW in Q2 ’19.
  • The QoQ growth of over 42% for Q2 ’19, can be attributed to this rapid growth in shipments combined with growing demand for the new A-series panels, the most efficient in commercial production.
  • Total capacity has grown from 610 MW in Q2 ’18 to 845 MW in Q2 ’19.
  • This is expected to grow further in the 2nd half of 2019, as the capacity from the A-series panels is expected to jump to 250MW from 25 MW in Q2 ’19.
  • This, too, has helped create a positive outlook about the company, with shipments expected to grow even further.

The P/S Ratio Has More Than Doubled In The Past One Year

  • All the above factors, have helped drive up the P/S ratio from 0.57x in 2018 to 1.21x in 2019.
  • The SunPower Technologies segment has picked up again, revenues have beaten company guidance over the past 2 quarters, and the new A-series panels are expected to significantly add to revenue over the next half of 2019.
  • To add to this, net debt has dropped from $1.25 billion to $820 million, since Q3 ’18.
  • These factors have created a positive outlook for the future of SunPower, with investors willing to pay more per dollar of company revenue.

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