Thursday, 2 November 2023

Why SunPower Stock Lost 8% After Earnings

by Rose White

Shares of solar power stock SunPower (NASDAQ: SPWR) dropped 8.2% through 11:30 a.m. ET on Wednesday, after the company reported a big “earnings miss” this morning.

Heading into Q3, analysts weren’t particularly optimistic about SunPower’s chances, forecasting only break-even earnings on $455 million in quarterly sales. SunPower, however, managed to miss both those marks, losing a non-GAAP (adjusted) $0.12 per share and with revenues coming in shy of forecasts at $432 million.

SunPower sales and earnings

And that was the good news. The bad news is that sales not only missed estimates but were also down 9% year over year. And although SunPower’s non-GAAP loss was $0.12 per share, its loss when calculated according to generally accepted accounting principles (GAAP) was nearly half again as big — $0.17 per share — versus a $0.73-per-share profit a year ago.

And the worst news is probably that investors could have avoided today’s loss if they had paid closer attention to SolarEdge’s (NASDAQ: SEDG) earnings report last week.

So how does SunPower explain today’s miss? That’s actually kind of strange.

On the one hand, SunPower CEO Peter Faricy blamed “lower-than-expected consumer demand as well as delayed revenue recognition from longer cycle times” for the revenue and earnings misses. On the other hand, though, he also pointed out that SunPower added 18,800 new customers in Q3 (which is curious in light of the revenues declining) and said that “bookings” of new solar projects for installation grew 59% sequentially in September — both of which sound like good news, implying that demand may already be reviving.

Finally, on the third hand, Faricy noted that SunPower is attempting to “reduce costs” — which is ordinarily something a company will say when things are not going well.

Should you sell SunPower stock?

Investors may be confused by the mixed messaging here, but things get a bit clearer as we turn to guidance. With Q3 results out of the way and Q4 underway, SunPower was able to update investors on its expectations through the end of this year.

It’s not looking good.

In contrast to prior guidance for positive $55 million to $75 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), SunPower now says investors can expect an EBITDA loss of $25 million to $35 million. The company will also lose money in GAAP terms — anywhere from $165 million to $175 million.

This works out to about $0.97 per share, which is about twice as bad as the $0.50-per-share loss forecast by analysts polled on S&P Global Market Intelligence. And call me crazy, but I kind of think that might be the reason investors are selling SunPower stock today.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends SolarEdge Technologies. The Motley Fool has a disclosure policy.