SunPower's Moat May Keep Shrinking

Yesterday afternoon, we got the results of SunPower's (Nasdaq: SPWRA  ) (Nasdaq: SPWRB  ) investigation into accounting irregularities, alongside fourth-quarter and full-year results.

Whether or not the fudging was foreseeable, the impact on restated financials runs as follows:

  • 2008 diluted earnings per share drop to $1.05 from a previously reported $1.09.
  • The first three quarters of 2009 take a bigger hit, dropping from $0.35 to $0.24 in EPS.

That latter impact is pretty significant. Even though SunPower says it has a handle on the issue, which arose from ineffective controls over inventory reporting by the firm's Philippines subsidiary, this is not the kind of thing that's easily shrugged off by capital market participants. Nor should it be.

Turning to the fourth quarter, SunPower saw a big lift in revenue, while gross margins ticked down sequentially, to 20.3%. That puts the U.S. company well behind the likes of Trina Solar (NYSE: TSL  ) , at 32.6% for the quarter, and has some analysts fretting.

SunPower's high-efficiency modules have historically commanded premium pricing relative to Chinese solar wares from shops like Canadian Solar (Nasdaq: CSIQ  ) and Solarfun Power (Nasdaq: SOLF  ) . That premium should remain, but considering its higher cost structure, SunPower's advantage is less evident today. As firms like Yingli Green Energy (NYSE: YGE  ) and JA Solar (Nasdaq: JASO  ) ramp up and refine their monocrystalline offerings, life could get even more interesting for the firm.

As for the 2010 outlook, SunPower is projecting sales of $2 billion to $2.25 billion and adjusted earnings of $1.25 to $1.65. If the company comes in at the high end of that guidance, the shares look pretty inexpensive. At the same time, there are plenty of reasons to be skeptical that the company will actually hit this range. Accounting snafu aside, I actually think this is one of the best-run solar shops. I just don't have a great deal of confidence in SunPower's competitive positioning for the year ahead.

Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (11)

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.

DocumentId: 1136563, ~/Articles/ArticleHandler.aspx, 4/23/2014 6:07:47 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...


Advertisement