Bachman Maintains HOLD on SunPower (Nasdaq:SPWRA) - Reduces Price Target

Nov 23, 2010
Author: SCP Editor

November 23, 2010 – Analyst Comments – Auriga’s Mark Bachman maintained his HOLD rating on SunPower (Nasdaq:SPWRA) this morning, while lowering his price target to $11 from $12 based on 1x tangible book, citing non-GAAP EPS estimate on lower margins.

Key Takeaways:

·         Extra disclosure should be good for improving investor confidence, but remains in wait and see mode;

·         Operating cash flow expected to be up by as much as $300M in FY11 from “disastrous $78M in burn so far in 2010”;

·         Higher sales guidance for FY11 is welcome, but note that “investors are faced with another year of 2H-loaded promises”;

·         Increased competition in R&C could erode price gap as higher efficiency modules arrive, potentially offsetting gains in UPP margins;

·         Notes that SunPower is a “serial capital raiser”;

·         GAAP-based valuation similar to other solar stocks leads to fair value significantly below tangible book – trying to use EPS method is ineffective – waiting on clarity on operating cash flow in FY11;

·         Looking for another big increase in 2012 capacity;

·         Reduced target to $11 from $12 – FY11 EPS estimate is $0.32, down from $0.38 previously