Shares of solar power systems manufacturer SunPower Corporation (NASDAQ:SPWR) dropped 10.4% in September as the solar industry continued its 2016 slide.
The terrible guidance after the second-quarter earnings report has continued to weigh on SunPower's shares and the solar industry in general (detailed in depth here). But the bigger issue was that reports during September indicated that solar panel prices had fallen below $0.40 per watt, a level at which few manufacturers can make money.
As a high-cost manufacturer, SunPower could feel a lot of pressure from falling solar panel prices. The one positive is that the company has begun focusing its high-efficiency modules on space-constrained applications that are less price-sensitive, and is expanding its P-Series panel manufacturing, which uses commodity solar cells, meaning it can leverage lower costs. But falling prices have put pressure on stocks across the solar industry, and SunPower is no different.
The investment thesis hasn't really changed over the past month, but sentiment can change rapidly in the solar industry. I think for SunPower the key is to focus on the long-term investment thesis and strategic moves management is making to stay competitive. P-Series modules and a new Oasis power plant design should keep the company competitive in utility projects, and high-efficiency modules are actually seeing strong demand in residential and commercial solar. Long term, that will be a positive for the company, but the short-term challenges are still a concern. See how the company gets through these challenges in coming quarters, because the upside is big for the solar companies that can survive the next year or two of upheaval that investors are expecting.