Shares of solar manufacturer SunPower Corporation (NASDAQ:SPWR) jumped 13.4% last month, according to data provided by S&P Global Market Intelligence, after the company reported first-quarter earnings and indicated it might have a brighter future ahead.
Revenue of $399.1 million and a net loss of $134.5 million, or $0.97 per share, didn't exactly impress investors, but the company may soon turn a corner. Residential and commercial solar sales and margins are holding steady and should improve as the company cuts costs on future manufacturing. But the bigger news came on the utility side.
During the conference call after earnings were released, management discussed a joint venture (JV) in China that could lead to 5 GW of capacity in the next five years with very little investment from SunPower. And when combined with a plant in Mexico, the Chinese JV could bring the volume and low costs that could make SunPower's utility-scale solar business profitable again.
2017 is a down year so far for the solar industry (and SunPower in particular), so any good news the company can get will be beneficial to the stock. Right now, it looks increasingly like the company will be able to generate positive cash flow from operations and end the year with at least $300 million in cash, as management has guided.
Looking down the road into 2018, SunPower has the potential to return to profitability as it moves away from project development to component sales. And with the volume that could be coming out of China (5 GW) and a plant in Mexico (at least 400 MW with room for expansion), the upside is tremendous if the strategy pays off. The further we get into 2017, the higher the odds that the financial recovery will take hold, so this stock could have more room to run higher.