Company Reports

SunPower has undergone a number of strategic changes in recent years to refocus on the U.S. residential solar market. In 2020, it completed the spinoff of Maxeon, its legacy solar module manufacturing business. In 2021, Peter Faricy replaced former CEO Tom Werner, who retired. Faricy promptly focused the company on U.S. residential by exiting the less profitable commercial segment and acquiring residential solar installer Blue Raven Solar.

We lower our fair value estimate for no-moat SunPower to $3 from $4.50 following fourth-quarter earnings. The main driver of our lower valuation is a reduced revenue forecast and share dilution associated with additional financing. We maintain our Extreme Uncertainty and Poor Capital Allocation Ratings given ongoing liquidity. We view shares as fairly valued.

We maintain our $4.50 fair value estimate for no-moat SunPower following news it received a waiver extension from creditors. We increase our Morningstar Uncertainty Rating to Extreme from Very High given the ongoing liquidity crunch facing the company.

Clean energy stocks have had a roller-coaster 18 months. Optimism following the passage of the Inflation Reduction Act in August 2022 gave way to rising interest rates in 2023. We highlight three key themes for investors to focus on in 2024: interest rates, U.S. policy, and profitability.

We maintain our $4.50 fair value estimate for no-moat SunPower following an 8-K filing disclosing a covenant breach at a subsidiary. We view SunPower shares as fairly valued. Our Very High Uncertainty Rating and Poor Capital Allocation Rating are unchanged.

We lower our fair value estimate for no-moat SunPower to $4.50 from $5.50 following third-quarter earnings. The main driver of our reduced valuation is a reduction to our margin forecast as we expect a more competitive environment to pressure long-term margins. We view SunPower shares as fairly valued. We maintain our Very High Uncertainty rating but lower our Capital Allocation rating to Poor from Standard given an increasingly constrained balance sheet.

SunPower has undergone a number of strategic changes in recent years to refocus on the U.S. residential solar market. In 2020, it completed the spinoff of Maxeon, its legacy solar module manufacturing business. In 2021, Peter Faricy replaced longtime CEO Tom Werner, who retired. Faricy promptly focused the company on U.S. residential by exiting the less profitable commercial segment and acquiring residential solar installer Blue Raven Solar.

We lower our fair value estimate for no-moat SunPower to $5.50 per share from $10 following the company's announcement of a material weakness in internal controls and plans to restate financials. Our reduced valuation is not directly related to the company's disclosure and relates to updating our long-term financial model to assume lower market share and lower gross margins.

SunPower has undergone a number of strategic changes in recent years to refocus on the U.S. residential solar market. In 2020, it completed the spinoff of Maxeon, its legacy solar module manufacturing business. In 2021, Peter Faricy replaced longtime CEO Tom Werner, who retired. Faricy promptly focused the company on U.S. residential by exiting the less profitable commercial segment and acquiring residential solar installer Blue Raven Solar.

We lower our fair value estimate for no-moat SunPower to $10 from $13.50 following second-quarter earnings. The main driver of our reduced valuation is a reduction to our revenue forecast following the company's recent guidance cut. We view SunPower shares as fairly valued. We see solar inverter companies as relatively better positioned to weather near-term volatility in the U.S. rooftop solar market.

SunPower has undergone a number of strategic changes in recent years to refocus on the U.S. residential solar market. In 2020, it completed the spinoff of Maxeon, its legacy solar module manufacturing business. In 2021, Peter Faricy replaced longtime CEO Tom Werner, who retired. Faricy promptly focused the company on U.S. residential by exiting the less profitable commercial segment and acquiring residential solar installer Blue Raven Solar.

On July 26, SunPower announced preliminary second-quarter results and drastically reduced its expectations for the full year. The shares were trading sharply lower—down 18% at the time of writing—with other residential solar companies trading lower by 3%-5%. We will formally update our model after SunPower reports results next week, but our preliminary expectation is that we could reduce our $13.50 fair value estimate by about 20%. We expect continued volatility in residential solar companies in the near term, given slowing demand in the United States, the result of unfavorable California regulatory changes and higher interest rates. We believe this volatility could present opportunities for investors, notably in solar inverter names like SolarEdge and Enphase, but valuations are not currently overly attractive.

We lower our fair value estimate for no-moat SunPower to $13.50 from $17 following first-quarter earnings. The drivers of our lower valuation are a slight decrease to our gross margin forecast and a higher discount rate to more closely reflect our Very High Uncertainty Rating. We view SunPower shares as fairly valued.

SunPower has undergone a number of strategic changes in recent years to refocus on the U.S. residential solar market. In 2020, it completed the spinoff of Maxeon, its legacy solar module manufacturing business. In 2021, Peter Faricy replaced longtime CEO Tom Werner, who retired. Faricy promptly focused the company on U.S. residential by exiting the less profitable commercial segment and acquiring residential solar installer Blue Raven Solar.

We maintain our $17 fair value estimate for SunPower following fourth-quarter results and 2023 guidance. We view SunPower shares as fairly valued.

We are adjusting fair value estimates for some of our rooftop solar coverage after refreshing our long-term industry outlook. The fair value estimate changes range from a reduction of 26% for SunPower to no change for Generac and SolarEdge. We reduce Sunrun's and Enphase's fair value estimates by 16% and 5%, respectively.

SunPower has undergone a number of strategic changes in recent years to refocus on the U.S. residential solar market. In 2020, it completed the spinoff of Maxeon, its legacy solar module manufacturing business. In 2021, Peter Faricy replaced longtime CEO Tom Werner, who retired. Faricy promptly focused the company on U.S. residential by exiting the less profitable commercial segment and acquiring residential solar installer Blue Raven Solar.

On Dec. 15, California regulators finalized new rules that roll back incentives for rooftop solar customers. The final ruling appears largely consistent with the proposed decision last month, and we maintain our fair value estimates for the rooftop solar equities we cover, which we view as largely fairly valued.

In the last 18 months there have been numerous competitive announcements within the rooftop solar inverter space. These range from Generac’s microinverter acquisition in July 2021, to Sunrun funding an upstart provider (Lunar Energy) earlier this year, to Tigo announcing it plans to come public this week. In addition, we flag the expiration of Enphase’s exclusivity with SunPower in first-quarter 2024. Germany’s SMA also plans to launch a new residential solar inverter product for the U.S. market in second half 2023. These announcements highlight the fact that capital is flowing to the highly desirable rooftop solar inverter space, which possesses industry-leading margins.

On Nov. 10, California's utility regulator released a new proposed decision related to the closely watched net energy metering, or NEM, 3.0 debate. The new proposal appears to be a win for the rooftop solar industry relative to the original proposal in December 2021. We maintain our fair value estimates as we digest the details and await a final decision, which could come as soon as next month. We view much of our rooftop solar coverage as fairly valued following sharp upward share price moves.