Why SunPower's Shares Dropped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of solar manufacturer SunPower (NASDAQ: SPWR  ) dropped as much as 12.9% today after reporting third quarter earnings.

So what: In the quarter, revenue was up slightly to $657.1 million and adjusted earnings per share rose from $0.03 a year ago to $0.44. That crushed the $0.25 estimate from Wall Street, and full year guidance of $1.30 to $1.50 per share in earnings is ahead of the current $1.23 estimate. So, why the drop?  

On the conference call, management said that earnings next year would be around $1, below estimates of $1.23.

Now what: The reason earnings are expected to be down next year are dilution of the share count, as convertible bonds are counted in the EPS calculation, and costs associated with a 350 MW capacity expansion. Also, keep in mind that management has historically set a low bar for earnings and then leapt well over it, something it will probably do next year.

I took a deeper dive into earnings earlier today, which you can find here, but the bottom line is that long-term investors shouldn't be concerned. SunPower is profitable, and when its manufacturing facility comes online the earnings growth engine will kick into high gear. This is still a top stock in solar.

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