Pacific Crest’s Bachman Says SunPower (Nasdaq:SPWRA) Valuation Appears To Have Peaked

Oct 20, 2009
Author: SCP Editor

October 20, 2009 – Analyst Comments – Pacific Crest’s Mark Bachman said SunPower’s (Nasdaq:SPWRA) Q3 will likely be strong, but ‘its valuation appears to have peaked.’

Key Takeaways

·         Q3 consensus revenue and EPS estimates are $420 million and $0.39, respectively, and ‘even with a Q3 beat, and a reiteration of 2009 guidance, valuation has likely already peaked at 25x when using 2010 EPS of $1.35’·         Suggesting taking a short position into the call – expects short-term investors to take profits following the Q3 print

·         Germany is likely to offset weakness in the U.S. “Have highlighted weak commercial installs, declining U.S. market share, delayed systems revenue and lower ASPs…all of which confirm long-term bearish thesis on the stock.”

·         “SunPower is not the best of breed and does not deserve a premium multiple…the stock currently trades at 25x our 2010 pro forma EPS estimate of $1.35; we believe 15x is a more appropriate multiple.. and therefore see downside risk to $20.”

* Rates the stock at UNDERPERFORM