SunPower (NASDAQ:SPWR) is one of the largest solar companies in the world, serving diverse international markets. The most efficient production solar cell in the world drives the company's competitiveness in everything from the smallest residential project to the largest utility scale system.
But SunPower is often misunderstood by the market, and rivals like SolarCity (NASDAQ:SCTY.DL) and SunEdison have built larger market caps despite running massive losses. SunPower, on the other hand, is profitable, and has a long-term competitive advantage with its superior panels. There have been some recent moves to bolster that lead, and a few more I expect to hear about at Analyst Day.
What we know
SunPower has already announced a couple of significant moves in the last few weeks. It announced a joint venture in China that aims to install 3 GW of C7 systems, augmenting a previous joint venture that will build the C7 product.
In South Africa, the company announced a 160 MW capacity expansion. This is one of the key markets for SunPower given the high solar insolation and cost competitiveness with the electric grid.
This other big move was the acquisition of SolarBridge, a micro-inverter manufacturer, which will allow SunPower to make an AC panel for the residential market. This will lower the time, complexity, and cost of installation, and allow module level monitoring for the solar system. But it's unlikely SunPower is done.
What to expect from SunPower this week
The reason SunPower is worth watching this week is because it will lay out the next few years of its future. It could even turn on the growth engine. Here's what I'm watching for.
Capacity expansion -- CEO Tom Werner has alluded to the likelihood that the 350 MW expansion in the Philippines will just be the start of SunPower's capacity growth. He's said that 1 GW is probably more than SunPower will do, but somewhere in the neighborhood of 700 MW could be in the works. If a capacity expansion isn't announced on Thursday, I'd be surprised.
Growth in residential solar -- The SolarBridge acquisition won't come without a major investment in residential solar by SunPower, but it remains unknown what that will look like. The company has been expanding offerings to partner installers, like financing and monitoring. Given the success of SolarCity and Vivint Solar, it would make sense to further vertically integrate. Plans for what expansion in residential solar will look like could be laid out.
Value for HoldCo -- The HoldCo/YieldCo strategy SunPower announced this year involves the company holding solar projects on its balance sheet instead of selling them during development, as it had done previously. The upside is that the strategy should add more value for shareholders long-term; but the downside is that value is trapped on the balance sheet, and SunPower hasn't explained the value it holds to investors. I expect a lengthy discussion on this, including a retained value calculation that, for better or worse, has become the industry standard for reporting project value.
2015 guidance -- What the market will likely be focused on this week is 2015 guidance. This year's figures were depressed by the projects being retained on the balance sheet, and start-up costs associated with the 350 MW capacity expansion that will come online next year. But even with those challenges, the company should report about $1.25 per share in non-GAAP earnings. Next year should be much better, and I'd expect $2 or more in guidance to go along with upside if HoldCo projects are sold.
This is a big week for SunPower
Historically, Analyst Day has been one of the few times during the year that SunPower explains its value clearly to shareholders, and one of the times it traditionally makes big announcements. If big announcements are made, it could move the stock.
It's also a chance to cover how much value SunPower is adding to both the income statement and balance sheet now and in the future. Guidance will be key at Analyst Day because future earnings are how analysts and investors price a stock. Given the capacity buildout and move to building solar systems and owning them long term, I think there's a lot of potential for long-term earnings growth.
I'll be in New York for Analyst Day, and you can follow me live tweeting (if it's allowed) at @flushdrawfool. I'll also have coverage later this week, plus an interview with CEO Tom Werner after the meeting that will post next week. Stay tuned to fool.com for the latest on SunPower and the rest of the solar industry.
Travis Hoium manages an account that owns shares of SunPower and is personally long SunPower stock and options. The Motley Fool recommends SolarCity. The Motley Fool owns shares of SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.