SunPower Downgraded By Credit Suisse Amid 'Surprisingly Large Guidance Cut'

SunPower Corporation SPWR cut its 2H16 guidance by 40 percent, while issuing its 2017 guidance meaningfully below investor expectations.

Credit Suisse’s Patrick Jobin downgraded the rating on the company from Outperform to Neutral, while reducing the price target from $32 to $12.

Cuts “Disconcerting”

“The cuts are problematic in their own rights, but the bigger issue for the stock from here is management credibility and lack of apparent stability in the core business,” Jobin mentioned, while adding, “There are a lot of moving parts to the realigned SunPower that will require strong execution in the coming quarters."

With the stock having declined 30 percent in after-hours trading, the analyst believes management needs to start taking steps to repair its reputation.

Related Link: SunPower Plunges On Weak Forecast, Low Earnings Metrics And Plans To Cut Workforce

Although the renewable energy space is underpinned with a long-term secular growth story and management usually takes a conservative approach, Jobin believes the guidance cut was unexpected and driven by factors that should have become apparent several months ago.

Factors Should Have Been Apparent

SunPower has lowered its CY2016 EBITDA guidance from $475 to $300, attributing the cut to several factors that Jobin noted the prior guidance updates should have reflected.

“Competitive PPA pricing, a tepid market for new issuance of YieldCo shares, and market disruption from the ITC extension are hardly new developments since 2016 guidance was reiterated three months ago,” the analyst pointed out.

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