Shares of solar installer SunPower (SPWR 5.85%) fell a whopping 23% in morning trading on Wednesday after the company disclosed it will restate earnings from the start of 2022 through the first half of 2023. Restating earnings is never good news, but the drop in shares seems a bit overdone given what we know so far.
At 11:00 a.m. ET shares are still down 18.8% and it doesn't look like a recovery is imminent.
Why SunPower is restating earnings
Management said in a filing with the SEC that the inventory of microinverters held at a third party had been overstated in a "range of approximately $16 million to $20 million, resulting in the associated cost of revenue being understated." In short, instead of being counted as the cost of goods sold, the product was accounted for as inventory, meaning gross margins and profits would have been lower than stated.
The period in question starts at the beginning of 2022 and spans the next six quarters. So if these estimates are correct, the impact will be around $3 million per quarter. That's not a very big impact, but the market isn't giving any free passes today.
Worries mounting about SunPower's future
Investors are worried that higher interest rates are eating into SunPower's margins, and now the company needs to deal with restated financials. If this leads to even bigger losses than expected, the company could face more financial challenges. All of that said, the stock is down 76% in the past year, and unless the company isn't financially viable, it's hard to see how there's not some value in the stock today.
