SunPower Downgraded At Oppenheimer Citing Lack Of Price Stability For Projects

The near-term demand for SunPower Corporation’s SPWR projects has diminished, Oppenheimer’s Colin Rusch said in a report. He downgraded the rating on the company from Outperform to Perform, citing concern over the lack of price stability for projects as well as modules.

Shrinking Demand

SunPower indicated a downturn in the number of buyers for large-scale commercial projects over the past several months, following the ITC extension and fallout from Sunedison Inc SUNEQ.

“We note that fundamentally, while pricing hasn't changed that much, the souring sentiment and investors' increasingly high hurdle rates have presented material headwinds to SPWR's power plant business,” analyst Rusch wrote.

Results And Guidance

SunPower reported its 2Q16 non-GAAP EPS at ($0.22), lower than the consensus estimate of ($0.19). Although revenue came in at $401.8 million, ahead of the consensus expectation of $345 million, the company recorded gross margin of 9.8 percent, short of the consensus of 13.9 million.

SunPower guided to 3Q16 non-GAAP revenue of $700-$800 million and EBITDA of $115-$140 million, both missing the consensus expectations of $1.4 billion and $183 million, respectively.

The company reduced its FY16 guidance for non-GAAP revenue from $3.2-$3.4 billion to $3.0-$3.2 billion, non-GAAP gross margin from 14-16 percent to 10.5-12.5 percent and EBITDA from $450-$500 million to $275-$325 million.

“While bidders circle to take advantage of the liquidation process at SUNEQ, demand for SPWR’s projects has diminished near term. We expect that dynamic to stabilize over several quarters to SPWR's benefit, but until we see further evidence of price stability for both projects and modules, we are moving to the sidelines,” Rusch commented.

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