Stock to Watch: SunPower Hits New Highs on Forecast

On Wednesday, May 15, shares of solar products and services company

were trading at new 52-week highs in the wake of a bullish forecast. In afternoon trade, the stock was up around 12 percent to $21.24. The day's gains are on top of a huge rally in the name in 2013, with the stock up roughly 280 percent year-to-date. The company forecast adjusted Q2 results which were above analysts' consensus estimates and fiscal 2013 results which were in line with current expectations. For Q2, SunPower guided for a net loss of $0.25 to $0.15 on revenue of $540 million to $590 million and gross margin of 13 percent to 15 percent. Adjusted results, which are comparable to Wall Street estimates, are expected to be net income of $0.05 to $0.15 per share on revenue of $550 million to $600 million. The company also guided for adjusted gross margin of 14 percent to 16 percent. This compares to current consensus EPS estimates calling for a loss of $0.02 per share on revenue of $513.31 million. The very strong second-quarter guidance underscores the operational momentum at SunPower and is the primary reason for the large rally in the stock on Wednesday. For fiscal 2013, SunPower guided for EPS in a range of a loss of $0.05 to a profit of $0.20 on revenue of $2.6 billion to $2.7 billion. Gross margin is expected to be between 15 percent and 17 percent. On an adjusted basis, the company sees EPS of $0.60 to $0.80 on revenue of $2.5 billion to $2.6 billion. This compares to current consensus estimates calling for net income of $0.64 per share on revenue of $2.55 billion. The recent huge rally in the stock took off in late April ahead of the company's fiscal first-quarter results. Heading into the key quarterly update, traders and investors sensed that the company would report financial results ahead of Wall Street expectations and purchased the stock. This turned out to be the right move as SunPower reported a blowout quarter and the shares continued to soar. In Q1, the company reported adjusted earnings per share of $0.22 compared to an adjusted loss of $0.12 in the year ago period. This easily topped estimates calling for net income of $0.06 per share. Revenue in the quarter was $635.4 million versus $494.1 million last year. This also easily beat consensus revenue expectations of $507.73 million by a very wide margin. Adding fuel to the rally has been the presence of short-sellers in the stock. In recent days, around 23 percent of SunPower's float has been sold short and these bearish traders may be covering their positions as the name skyrockets against them. Currently, this is one of the hottest stocks in the market and given the obvious fundamental shift that is taking place in the company's operations and the potential for a further short-squeeze, SPWR could see more large gains going forward.