SunPower Corporation

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SunPower Corporation (NASDAQ:SPWR) is a California based company that specializes in the generation and storage of solar energy. SunPower does business primarily in the United States, and installs solar panels using its patented Equinox system with SunVault storage that transforms your house into a vehicle for energy storage. The company also has numerous business contracts with world class brands including WalMart, Toyota, FedEX, Johnson & Johnson, and Lowe’s. As of the writing of this article, SunPower has a market cap of just under $5 billion USD, and trades with a share price of roughly $27 USD per share.  Learn More
Do you have renewable energies as a part of your diversified portfolio? While sectors like electric vehicles and hydrogen fuel cells have been popular amongst investors, traditional renewable energy sources like solar and wind have been overlooked. SunPower has had a profitable year for long-term investors, with a 52-week trading range of $3.93 to a staggering high of $57.52. Given the stock’s current price level, it represents a 52% decline from the 52-week high.

The Bullish Case: Renewable energies are hot right now, especially after the Biden administration made a $2 trillion pledge to improve America’s green infrastructure. As mentioned, solar power has an interesting sentiment amongst investors as many are gravitating towards companies like Tesla as a play on sustainable energy. This presents solar companies as a nice undervalued segment of the broader renewable energy market, even though the adoption of the technology has not been as widespread. SunPower is anticipating a 35% growth in revenues in 2021, with a continued rising growth trend in 2022 from both commercial and residential customers. SunPower is also improving its profitability with a 3% EBITDA growth in 2021 and an expected rise to a greater than 40% rate in 2022. The company also anticipates a rise in adoption of solar energy amongst residential users, with 21 million households with solar storage by 2050. 

The Bearish Case: The elephant in the room is always going to be that residential consumers just do not want to install solar panels on their homes. Everyone wants an electric vehicle, but nobody wants to cover their home with panels, even if SunPower’s Equinox and SunVault systems boast a more innovative and user-friendly design. Industry leader Tesla is also expected to make an aggressive move into power storage with its Tesla power walls and regional power grid systems. The total addressable market for solar panels may technically be any home or business building in the United States, but again, it goes back to how willing people are to adopt the technology. SunPower estimates 21 million homes to have solar storage by 2050, but even if the company was starting today with zero, that would be adding less than 1 million homes per year. Which leads to how big its total addressable market actually is. SunPower only does business in the United States, so without international expansion, the ceiling is always going to be limited.
Final Verdict on SunPower : SunPower saw a surge in late January during the Reddit short squeeze event that saw companies like GameStop and AMC skyrocket. SunPower has some decent fundamentals though with a balance sheet that is not too high in debt, and trading at a price to sales ratio of only 4. While many of these are bullish signs, it is hard to be bullish about the solar industry right now, especially during the recent growth sector correction. Value investors may like its current low price, but there are better options to play the renewable energy boom.

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