Shares of SunPower (Nasdaq: SPWR) hit a 52-week low today. Let's look at how it got here and whether clouds are ahead.

How it got here
Solar stocks have been absolutely pounded in the last 12 months and efficiency leader SunPower has been no different. An oversupply of modules has led to rapidly falling prices and growing losses for solar manufacturers. After oil giant Total bought a majority stake in the company, sending shares to a new high a year ago, the tumble has been fast and steep.

The share performance hasn't been out of the ordinary for solar stocks. Crystalline silicon module manufacturers Suntech Power (NYSE: STP), Trina Solar (NYSE: TSL), and Yingli Green Energy (NYSE: YGE) have followed a very similar path, as you can see below. Thin-film manufacturer First Solar (Nasdaq: FSLR) has had an even harder fall, collapsing nearly 90% over the past year.

SPWR Chart

SPWR data by YCharts

These five solar leaders are barely posting positive gross margins, as you can see in the table below. But eventually these stocks could provide some value with price/book ratios falling below 0.5 across the board. Someone will have to emerge from this industry and whoever does will leave investors very happy.



Gross Margin (MRQ)

Quarterly Revenue Growth

2012 EPS Estimate

SunPower 0.5 9.2% 9.5% ($0.11)
First Solar 0.3 15.4% (12.4%) $4.08
Suntech Power 0.4 0.6% (53.3%) ($1.78)
Trina Solar 0.4 5.8% (36.5%) ($1.00)
Yingli Green Energy 0.5 7.8% (8.8%) ($0.80)

Sources: Yahoo! Finance and company filings. MRQ = most recent quarter.

As you can see, only First Solar is expected to post a profit this year, and even that hasn't eased the market's fears. One of the biggest problems is that a shakeout is under way in the industry and many companies won't survive, so picking winners at this point is risky business.

What's next?
At this point there is a lot of bad news priced into SunPower, but the reality is that the company could still go under. How low could the stock could go? The answer is: zero.

I don't think that's likely, though, because SunPower has the most efficient modules in the business and has the backing of oil giant Total. It would be more likely that Total would just buy out the company rather than let it fail, and with financials slowly improving, I don't expect a failure in the near term.

SunPower actually posted an adjusted profit per share in two of the last three quarters, something we often overlook. For 2013, analysts are expecting conditions to improve quickly and the company to post a profit of $0.48, although that should be taken with a huge grain of salt because solar earnings are hard to predict. What I'm trying to say is, as bad as things appear right now, SunPower is in a decent position in a growing solar market. As countries like China, India, and Saudi Arabia rapidly expand their solar installations and weaker manufacturers go out of business, conditions will improve.

The CAPS community has mixed feelings, giving the stock a three-star rating out of five. I think that SunPower is poised for big things eventually, but picking the stock's direction short-term is tough. I've called it the best energy stock of 2012 and I'm long personally, but I have a very long-term horizon and a high risk tolerance, so if you don't have those two qualities, this stock isn't for you.

Interested in reading more about SunPower? Click here to add it to My Watchlist, which will find all of our Foolish analysis on this stock.

Fool contributor Travis Hoium owns shares of SunPower in personal and managed accounts. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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