SunPower (SPWR -8.91%) has seen its business model change over the years, but it's now focused on the residential solar power industry. In this episode of "The High Energy Show" on Motley Fool Live, recorded on May 10, Motley Fool contributor Travis Hoium talks about the company's optionality and how it's in a much better place financially now than before.
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Travis Hoium: Like you can go onto SunPower site and get an initial quote for solar system right now in the next couple of minutes. Then they are doing the supply agreements with Maxion, who was their spin-off, but they have now adjusted that agreement so they have more optionality with solar panels that they can put on there. They've got a recent, talk of a deal with First Solar, trying to do a super-high-level, high-efficiency solar panel that would be probably produced in the U.S. That's an interesting optionality. It sounds like that deal is not set in stone at this point. But they are trading about 20 times EBITDA. They're adding more and more energy storage to the business, more and more chargers to the business. They have this new deal with their dealers where they will basically help you grow your business in return for an equity piece. I think it's interesting that they're saying, hey, we'll help you be our local supplier, but we also want some of the upside if and when you grow. I just look at them, their CEO came from Amazon. I think he understands this technology piece and where you have power really well. They're trying to basically be the choke point in the middle of two commoditized pieces of the value chain, and I think that could be a really good place to be. We got a lot of optionality in things like virtual power plants with the energy storage systems that they're building. The valuation is pretty good, I think, and their balance sheet is a lot better than it was just a few years ago. They're about net debt break-even, if you look at all the assets that they have on their balance sheet compared to their debt. They're not doing the financing. That's the other piece. They don't have the financing risk that a company like Sunrun has because they're putting that off on a company like Hannon Armstrong. They are able to just adjust their prices, and their numbers are just a little bit cleaner. That is the company that I'm going with. I think there's a lot of long-term trends behind the residential solar industry and we're seeing just a handful of names really come to dominate the market and I think that's going to continue. I'll also add the flexibility of, do you want to pay with cash? Do you want to get a loan or do you want to us to line up 20-year, 30-year financing? They're not a company that's tied to any one of those. They will give you whatever you want as a customer.