Market Overview

SunPower Continues to Soar!

SunPower Continues to Soar!

Shares of SunPower (NASDAQ: SPWR) soared again on Tuesday as the stock last traded up almost 17 percent late in the session. The stock has been on a roll as of late and now is up around 137 percent in 2013 alone. Over the last three months, shares have surged 233 percent, giving the company a market cap of over $2 billion.

The rally in the shares has been gathering steam over the last month, when the stock has surged 72 percent, and the last five days, when SunPower climbed 41 percent.

On February 7, the company released its fiscal fourth-quarter earnings results, sending the stock lower. SunPower, which is 60 percent owned by French energy giant Total, reported a net loss of $144.8 million or $1.22 per share, versus a loss of $93.0 million or $0.94 per share, in the year ago period.

On an adjusted basis, the company reported net income of $0.18 per share, versus $0.04 per share, in last year's fourth-quarter. This beat analysts' consensus estimates of $0.15.

Revenues for the quarter were $678.53 million compared to $625.28 million last year. This missed Wall Street consensus revenue estimates of $768.27 million by a wide margin.

Higher operating expenses in the quarter also weighed on margins. Gross margin fell 10 basis points to 6.9 percent while adjusted gross margins rose to 18.7 percent.

For the first-quarter, the company said that it expects adjusted earnings per share of $0.05 to $0.20 on revenue of $475 million to $550 million. This compares to current consensus EPS estimates calling for a loss of $0.11 on revenue of $544.76 million.

SunPower's President and CEO Tom Werner struck a bullish note for his company, saying that "we now have significant revenue and margin visibility for our business for multiple years." The statement underscored the stabilizing trends in the solar industry which are having a favorable effect on the business.

Although the company's guidance was solid for the first-quarter, the most recent earnings report appears to only be a peripheral catalyst for the stock. The big rally in the name is being attributed to Wall Street whispers that solar firms may look to spin-off tax-free income from their projects using a REIT structure. The talk of possible REIT spin-offs has helped light a fire under the entire solar sector.

On Tuesday, shares of First Solar (NASDAQ: FSLR) continued to rally and were trading up around five percent Tuesday. That stock has climbed almost 20 percent over the last month. LDK Solar (NYSE: LDK) was up a little better than three percent and has more than doubled over the last three months.

Last week, Lazard analyst Sanjay Shrestha raised his price target for SunPower from $11 to $15, saying that a "leading expert on project financing" for solar installations suggested that the deals could potentially be securitized like a REIT.

Shrestha wrote, “Solar securitizations should benefit both small and medium-scale projects from companies such as MEMC and SunPower, and large-scale utility projects (First Solar) could more easily qualify for a REIT structure, a view we had not heard before.”

Another catalyst for the entire sector is heavy short-selling across many solar names. The sector has experienced a severe contraction in valuations in recent years and most of the stocks are highly out of favor. As sentiment began to shift in the space, some short-sellers may have been caught flat-footed and are now exiting their trades.

Posted-In: Earnings Long Ideas News Guidance Intraday Update Movers Trading Ideas Best of Benzinga


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