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Why SunPower's Shares Popped 24.8% Today

By Travis Hoium - Oct 31, 2019 at 12:18PM

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A surprisingly big profit has investors betting on a turnaround for this solar manufacturer.

What happened

Shares of SunPower ( SPWR -9.11% ) jumped as much as 24.8% in early trading Thursday after the company reported third-quarter 2019 results. Shares settled significantly as the day went on and were only up 8.7% at 11:45 a.m. EDT.

So what

Non-GAAP revenue was up 10.9% to $491.7 million, adjusted EBITDA was $42.0 million, and net income was $10.6 million, or $0.07 per share. That compares to guidance of $450 million to $490 million in revenue and adjusted EBITDA of $30 million to $50 million. Analysts were expecting just $0.02 per share in earnings, so that was the biggest surprise today.

Utility-scale solar project built in a field with SunPower solar panels.

Image source: SunPower.

Interestingly, management didn't increase financial guidance, which for the full year is still for $1.9 billion to $2.1 billion in non-GAAP revenue and $100 million to $120 million in adjusted EBITDA.

Now what

There have been a lot of ebbs and flows in solar stocks in 2019, and investors didn't know if factors like tariffs and things like wildfires would impact companies like SunPower. But the company continues to perform well as it upgrades equipment to produce the A-Series high-efficiency solar panel for residential markets and the P-Series product for commercial- and utility-scale projects.

I think the bounce today is really just recovering some of what the stock has lost in recent weeks, so I wouldn't read too much into it. What I'm looking for is continued gross margin improvement beyond the 15.9% reported in the third quarter. If gross margin peaks at more than 20%, this could be a top renewable energy stock once again.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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