Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Wall Street Finally Sees Value in SunPower

SunPower (NASDAQ: SPWR  ) is on fire again today after being upgraded by an analyst from Lazard. The analyst pointed to the company's earnings power, strong leadership, superior technology, and global partnerships as reason to buy.

This is the first time that analysts have really gotten behind SunPower in a meaningful way so it's at least worth paying attention to for a minute. As of yesterday, 12 of the 18 analysts that Yahoo! Finance tracks have SunPower as a hold rating, and 6 have it as a sell, so analysts have been anything but bullish on the stock until now.  

A little late to the game
As long time readers know, The Motley Fool has been out ahead of the solar story for well over a year now. I called SunPower my top stock of 2012, which may have been a year early but we Fools are long-term investors so we're more concerned with long-term gains than just today's trade. My Foolish debate crew made an outperform call on the stock in April, and as recently as last week I called SunPower the best stock in a booming solar market. I've also put my money where my mouth is with SunPower (see my positions here) so it's good to see another analyst finally see the value in this quickly improving solar company.

My question is why it took so long? The answer may have more to do with analysts and investors getting burned by solar stocks in the past than not seeing the value. And to the question, why now? That's easy.

After Berkshire Hathaway (NYSE: BRK-B  ) bought 579 MW of SunPower projects yesterday it's much easier for analysts and investors finally get on board. It's hard to stick your neck out when everyone is betting against you, but with Buffett in your corner people have to listen.

The story keeps getting better
The earnings strength Lazard pointed to isn't anything new. The company has been beating estimates for over a year now and recent results have shown an uptick in margins. At the same time, Chinese competitors Suntech Power (NASDAQOTH: STPFQ  ) , Yingli Green Energy (NYSE: YGE  ) , and Trina Solar (NYSE: TSL  ) are seeing margins deteriorate under the weight of oversupply and debt in China.

This oversupply and debt has caused installers to think twice about buying from any manufacturer who doesn't have a strong balance sheet. Check out my article here to see just how terrible nearly every solar balance sheet in China is right now. So, SunPower and First Solar (NASDAQ: FSLR  ) gain business because installers want a stable partner. First Solar has translated that into huge utility-scale projects, and SunPower has built a huge residential network with some utility projects sprinkled in.

SunPower has translated this into improving margins but has yet to translate it into a profit, which is where investors get worried. But once SunPower does swing to a profit, and China reduces supply, the conditions are set for a long, sustainable rise.

Don't forget about big brother
The other factor investors often forget is Total's (NYSE: TOT  ) majority ownership of SunPower. The oil giant has become a great funding source for the company's projects and provides downside protection when the going gets rough.

The only two companies I would buy in solar come with this type of financial strength. First Solar is still profitable and has a strong balance sheet while SunPower has the backing of Total. Don't underestimate this as a position of strength in solar.

Foolish bottom line
SunPower's huge jump today may not last once short-term investors take their profits and the analyst upgrade loses its steam, but in the long term this company is still the best stock in solar. High-efficiency modules, a large backlog of projects, and increasing demand in its biggest markets have SunPower set up for a huge 2013.

Investors and bystanders alike have been shocked by First Solar's precipitous drop over the last 12 months, and now the stakes have never been higher for the company. Is it done for good, or ready for a rebound? If you're looking for continuing updates and guidance on the company whenever news breaks, we've created a brand new report that details every must know side of this stock. To get started, just click here now.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2177447, ~/Articles/ArticleHandler.aspx, 9/25/2016 11:52:22 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:00 PM
SPWR $8.52 Up +0.27 +3.27%
SunPower CAPS Rating: ****
BRK-B $145.00 Down -1.53 -1.04%
Berkshire Hathaway… CAPS Rating: *****
FSLR $37.06 Up +1.64 +4.63%
First Solar CAPS Rating: ***
STPFQ $0.00 Down +0.00 +0.00%
Suntech Power Hold… CAPS Rating: *
TOT $46.53 Down -1.06 -2.23%
Total CAPS Rating: ****
TSL $10.32 Down -0.11 -1.05%
Trina Solar CAPS Rating: **
YGE $3.89 Up +0.19 +5.14%
Yingli Green Energ… CAPS Rating: *