SunPower Corp

SPWR Details

SunPower Corp (NASDAQ: SPWR) is engaged in designing and manufacturing solar panels and systems for all-in-one residential and commercial solutions.

Q2FY21 Result Performance (For the Quarter Ended July 4, 2021)

• The growth across segments has translated into a robust 41.9% YoY growth in its overall revenue to $308.93 million in Q2FY21 from $217.67 million in Q2FY20.
• SPWR’s sustained execution across its residential and commercial businesses has resulted in a 40% growth in megawatts compared to the year-ago period and it doubled its gross margin per watt.
• The company has added 13,000 customers in its Residential and Light Commercial business and residential bookings grew by 16% sequentially and 67% YoY.
• Strong bookings momentum was witnessed in the Commercial and Industrial Solutions business, up over 20% YoY.

Consolidated Statement of Operations (Source: Company Reports)

Recent Update

Partnership  with Wallbox: The company, on 29 July 2021, has partnered with Wallbox, a leading electric vehicle (EV) charging solutions provider. This strategic alliance will enable SPWR in offering at-home EV charging as well as solar and/or storage system installation to new customers. It will also aid in providing its residential customers a simple and cost-effective integrated solar, storage, and EV solution.

Outlook

SPWR forecasted attaining GAAP revenue between $325 to $375 million in Q3FY21 with MW recognized to stay between 125 MW to 150 MW. Further, it expects to achieve adjusted EBITDA in the range of $21 to $31 million due to tremendous improvement in linearity. Additionally, it expects its GAAP net loss to be between $10 million to $0 million in Q3FY21.

For FY21, the company forecasted of achieving GAAP revenue between $1.41 to $1.49 billion and GAAP net income in the range of $40 to $60 million. It expects MW recognized to remain between 540 MW to 610 MW. However, the company has retained its guidance on adjusted EBITDA at $110 to $130 million that includes up to $10 million incremental spending  on customer experience and digital initiatives, which will aid in further boosting the growth of its residential business in 2022 and beyond.

A recent survey by the company revealed that high-profile grid failures, power outages, and mounting electricity bills in the US are resulting in robust adoption of solar with attached storage.

Key Risk

The company’s business operations could get adversely affected by changes in international trade policies, tariffs, or trade disputes. It relies on sustained availability of third-party financing arrangements for its projects to deliver its growth strategies. Further, an increase in the global supply of solar cells and panels, as well as intense competition may hurt its product prices.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average), considering the continued strong demand for its solar and storage solutions in both its residential and commercial markets, as well as momentum in bookings, and a strong balance sheet with the retirement of its outstanding 2021 convertible notes.

Considering the aforementioned factors along with its accelerating customers base, strong execution, robust pipeline, and sustained strive towards expanding its addressable market, and decent outlook, we give a “Buy” recommendation on the stock at the current market price of $21.09 per share, up by 0.76% on 21^st September 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices

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