“A spotty execution history, gain on sale vs. asset holding model and lofty valuation have made us skeptical in the past,” he wrote on Monday. “With that said, today the company is a different story, firing purely on its historically profitable resi [residential] segment and with a relatively unobstructed path to grow on both an absolute and per share basis.”
SunPower held its analyst day on March 31, which Dumoulin-Smith said was “more encouraging than expected.” The analyst pointed to “exceptionally robust tailwinds” in the sector.
Moreover, management signaled it was expecting two times the market growth with an adjusted Ebitda per customer of between $3,000 to $4,000 by 2025, above the 2022 guidance of $2,000 to $4,000. Using these figures, Ebitda, or earnings before interest, taxes, depreciation and amortization, estimate, is well above Wall Street consensus, Dumoulin-Smith said.
But ultimately, it comes down to execution, the analyst added. Ebitda improvement hinges on top-line growth, cost reductions, and margin improvements.
Indeed, the company signaled it was aiming to cut customer acquisition costs by 20% over the next couple of years using data-driven marketing, which would help with margins and put it ahead of competitors.
Management also suggested it would begin pivoting toward a direct, or online, sales platform, rather than using an in-person sales force. That could be a boon to the company, especially if management decides to roll out its budget panels sales program in the coming months, which will be crucial in developing the direct sales program.
“The question in our view is whether this Direct channel will be able to maintain the premium pricing that SPWR has enjoyed vs peers if more directly competing ‘head on’ with largely independent peers at a much lower price point,” he wrote.
SunPower stock was up about 12% to $23.94 on Monday. The stock has gained about 15% this year. Analyst sentiment has remained cautious on the stock, with 71% rating it a Hold, 12% rating it a Sell, and 18% rating it a Buy.
Write to Sabrina Escobar at [email protected]
SunPower Stock Is Upgraded. It Has an ‘Unobstructed Path’ to Growth.
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PV Salvador solar plant near El Salvador, in the Atacama Desert, northern Chile. The photovoltaic plant, built by SunPower, a California-based branch of Total, with a maximum output of 70 Megawatts, is one of the world biggest solar plants.
Vladimir Rodas/AFP via Getty Images
Shares of
SunPower
were surging Monday after the solar panel manufacturer received an upgrade from Bank of America analysts following a “more encouraging than expected” analyst day.
BofA’s Julien Dumoulin-Smith upgraded SunPower (ticker:
SPWR
) to Neutral from Underperform on Monday, and raised his price target to $23 from $13.
“A spotty execution history, gain on sale vs. asset holding model and lofty valuation have made us skeptical in the past,” he wrote on Monday. “With that said, today the company is a different story, firing purely on its historically profitable resi [residential] segment and with a relatively unobstructed path to grow on both an absolute and per share basis.”
SunPower held its analyst day on March 31, which Dumoulin-Smith said was “more encouraging than expected.” The analyst pointed to “exceptionally robust tailwinds” in the sector.
Moreover, management signaled it was expecting two times the market growth with an adjusted Ebitda per customer of between $3,000 to $4,000 by 2025, above the 2022 guidance of $2,000 to $4,000. Using these figures, Ebitda, or earnings before interest, taxes, depreciation and amortization, estimate, is well above Wall Street consensus, Dumoulin-Smith said.
But ultimately, it comes down to execution, the analyst added. Ebitda improvement hinges on top-line growth, cost reductions, and margin improvements.
Indeed, the company signaled it was aiming to cut customer acquisition costs by 20% over the next couple of years using data-driven marketing, which would help with margins and put it ahead of competitors.
Management also suggested it would begin pivoting toward a direct, or online, sales platform, rather than using an in-person sales force. That could be a boon to the company, especially if management decides to roll out its budget panels sales program in the coming months, which will be crucial in developing the direct sales program.
“The question in our view is whether this Direct channel will be able to maintain the premium pricing that SPWR has enjoyed vs peers if more directly competing ‘head on’ with largely independent peers at a much lower price point,” he wrote.
SunPower stock was up about 12% to $23.94 on Monday. The stock has gained about 15% this year. Analyst sentiment has remained cautious on the stock, with 71% rating it a Hold, 12% rating it a Sell, and 18% rating it a Buy.
Write to Sabrina Escobar at [email protected]
Source: https://www.barrons.com/articles/sunpower-spwr-stock-upgrade-solar-51649095837?siteid=yhoof2&yptr=yahoo