Deutsche Bank Still Buying SunPower, Sees 50% Upside

Deutsche Bank’s Vishal Shah maintained a Buy rating for SunPower Corporation SPWR, while adjusting the price target to $37. The company’s Q4 results included Quinto revenue recognition, while “upbeat management tone focused on positive ITC impact and potential market share gains as the company invests heavily in P Series modules over the next several years.”

SunPower reported Q4 revenue and non-GAAP EPS of $1,364M and $1.73, beating the Deutsche Bank estimates of $1,272M and $1.60 and consensus expectations of $1,271M and $1.52, respectively.

The company projected FY16 revenue and non-GAAP EBITDA at $3.2-3.4B and $450-500M, versus the Deutsche Bank estimates of around $3.5B and $528M and consensus expectation of about $3.4B and $437M, respectively.

Analyst Vishal Shah mentioned the key points as:

1. SunPower has plans to increase capacity to ~4GW, including P-Series modules, over the next several years, as compared to its 2016 capacity guidance of ~1.85GW.
2. The company pulled ~$65M in EBITDA into Q4, due mainly to the Hooper project acceleration, residential lease acceleration, and 8point3 equity in earnings contribution
3. “Management suggested some willingness to push out projects into 2017 but did not update guidance due to ITC”
4. SunPower has entered into another utility partnership with TXU in Texas
5. The company’s pipeline increased to ~14GW in Q4, composed of 4.1GW Americas, 1.28GW Europe, 6.15GW Middle East/Africa and 3GW APAC.
6. “The company dropped down Kern County to 8point3 and has next plant on offer as well”
7. The recently-closed tax equity fund is likely to provide needs for this year
8. Commercial margins were lower in Q4 on account of polysilicon charge