SunPower's woes spell good news for these solar names

By James Rogers

SunPower's role in the market "can easily be absorbed by other players," says Raymond James analyst Pavel Molchanov

A number of solar players stand to benefit from the challenges facing SunPower Corp., according to Raymond James.

Last week SunPower (SPWR) shares had their worst week on record after the maker of solar-energy technology announced changes to its customer-financing options, the latest development in a turbulent spell for the company.

"With SunPower shares ending last week at a record low, the catalyst for the sharp selloff toward the end of the week was the company's decision - communicated to its network of local dealers - to halt lease-based newbuilds," wrote Raymond James analyst Pavel Molchanov, in a note this week. "To underscore, SunPower does not finance or install any systems - it is purely the proverbial middleman - so its role in the market can easily be absorbed by other players."

SunPower's stock skyrockets despite company's challenges: 'Shorts dug themselves a hole here'

Raymond James notes that SunPower has long been a top-tier player in U.S. residential solar, and is one of a handful of players with something close to a national footprint. The others are SunRun Inc. (RUN), Sunnova Energy International Inc. (NOVA), Complete Solaria Inc. (CSLR), and the solar division of Tesla Inc. (TSLA), formerly SolarCity Corp., according to the analyst firm. "While any of the aforementioned companies will be in a position to pick up customers that perhaps were considering SunPower, in our view Sunnova is a prime candidate to do so, given its similar dealer-focused model, which creates flexibility in the geographic customer mix (e.g., SunPower had a historical overweight to California)," wrote Molchanov. "Ultimately, where there is demand, there will be supply."

Raymond James downgraded SunPower from outperform to market perform earlier this year, citing uncertainty around a going-concern statement disclosed by the company in December 2023.

On Monday, Mizuho Securities downgraded SunPower shares to underperform and cut its price target, citing the company's decision to change customer-financing options, as well as balance-sheet constraints.

Related: SunPower's stock just had its worst week on record, and this analyst sees more pain ahead

Also Monday, Susquehanna said it was suspending its SunPower rating and price target following the company's letter to dealers last week stating it will no longer support lease and PPA sales. "Going forward, our prior estimates, price target and recommendations should no longer be relied upon," Susquehanna analyst Biju Perincheril wrote. Susquehanna previously had a neutral rating and price target of 68 cents for SunPower.

With a power purchase agreement, or PPA, customers agree to purchase the electricity generated by a solar system installed at their home instead of paying to rent the system.

SunPower shares fell earlier this month on news that auditor Ernst & Young had resigned over concerns about the company's financial statement. In a filing, SunPower also said it received an SEC subpoena earlier this year relating to "certain accounting matters" including aspects of the company's revenue recognition practices. SunPower said its Audit Committee has authorized and internal review, conducted by an independent outside law firm, with the assistance of independent forensic accountant advisors.

Related: SunPower says it's tapping second tranche of previously announced loan

Despite the company's challenges, SunPower shares skyrocketed Tuesday, and were attracting plenty of attention on social media. SunPower's stock, which ended Tuesday's session up 31.3%, are down 1% in premarket trades Wednesday.

SunPower shares are down 80.6% in 2024, compared with the S&P 500 index's SPX gain of 16.5%.

-James Rogers

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