SunPower (SPWRA) shares are getting battered today after the solar company late yesterday issued disappointing guidance for the first quarter and for all of 2010.
While Q4 results were fine, and the company also completed its investigation into accounting issues at its Philippines unit, the weak forecast is weighing heavily on the shares. As noted yesterday, the company sees non-GAAP Q1 revenue of $330 million to $350 million, with profits of 5 cents a share, well below the previous Street estimates of $427.3 million and 34 cents. For the full year, SunPower expects revenue of $2 billion to $2.25 billion, with EPS of $1.25 to $1.65; the Street has been forecasting $2.06 billion and $1.78.
The Street is not happy about the guidance, and analysts are chopping their numbers. Here’s a rundown on some of their revised thinking on the stock:
* Timothy Arcuri, Citigroup: He repeated his Sell rating, cutting his price target to $15, from $18. With the company’s recent acquisition of SunRay, he notes, SPWRA is increasing reliant on its systems business for profits; he calculates that its core module business trades at a 60%-70% premium to Chinese vendors. “While SPWRA continues to get an efficiency and ‘based in U.S.’ premium, this seems unjustified given that gross margins for the Chinese players are as good or better than SPWRA -a nd likely to remain so for the foreseeable future,” he writes.
* Gordon Johnson, Hapolaim Securities: He repeats his Sell rating and $15 target. “Given the potentially severe module pricing pressure to follow Germany’s 15% mid-year feed-in-tariff cuts - and the potential for other countries to follow suit in reducing subsidies - France, Italy and the Czech Republic - in conjunction with industry wide capacity ramps, it is likely SPWRA’s price premium will weaken in 2010…we anticipate Street numbers will have to come down through the year.”
* Gary Hsueh, Oppenheimer: He repeats his Perform rating. “While most peers expect sequential growth in Q1/Q2, SPWRA is experiencing the opposite due to a push out of systems revenue from the first half to the second half,” he writes. “We remain on the sidelines on SPWRA given disappointing guidance, a high cost structure and lumpy systems business.”
* Ben Pang, Caris & Co.: He maintains his Below Average rating, cutting his target to $18, from $21. “We think earnings could be compromised by lower tariffs and stiffer market share competition,” he writes.
* Colin Rusch, ThinkEquity: He rates the stock “Hold,” cutting his target to $20, from $34. “The real story emerging for SunPower is revision of GAAP earnings estimates lower due to compensation costs associated with the SunRay acquisition, the impact of price erosion on the company’s earnings power, and the company’s evolving business model, which continues to move closer to customers and away from manufacturing,” he writes. “As the company is becoming more of a sales organization than a technology company, we believe a reduction in earnings multiple is warranted.”
I would point out here that the stock still has plenty of fans. Here are a few more bullish views:
* John Hardy, Broadpoint.Amtech: He keeps a Buy rating, with a $29 target. “Results and guidance were weaker than expected, though we view removal of accounting overhand and added project visibility positively,” he writes.
* Vishal Shah, Barclays Capital: He maintains his Overweight rating and $28 target. “We believe the cost structure, pricing premium and market opportunity is not well understood by investors,” he writes, adding that with shares trading at about 1.3x book versus 2-4x book for most solar companies, “downside appears limited.”
* Ramesh Misra, Brigantine Advisors: He maintains a Buy rating, with a $24 price target. “Clearly the solar market is increasingly being driven by larger utility scale solar projects, and SunPower’s pursuit of opportunities here, especially in Italy - augmented by the acquisition of SunRay - means a reset of earnings expectations,” he writes, but adds that he remains bullish, “as we think SunPower is among the best positioned solar companies to benefit from the metamorphosis underway in the industry.”
Today, though, the bulls are not being heard.
SPWRA is down $3.36, or 15.3%, to $18.68 |
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