SunPower
is grappling with a slowdown in the market for solar panels. Now
Citi
has turned bearish on the stock, predicting that the company will add fewer residential customers this year.
Analyst Vikram Bagri downgraded the solar panel maker’s stock to Sell from Neutral. He lowered his target for the stock price to $4.50 from $10 earlier.
SunPower stock (ticker: SPWR) stock fell 7.3% to $5.37 Tuesday morning, leaving it down 70% so far this year.
Solar companies have had a tough year. The
Invesco Solar ETF
(TAN), which holds stock in both
Enphase
(ENPH) and SunPower, is down 33% so far in 2023. Americans are buying fewer solar panels in several parts of the country because high interest rates have raised borrowing costs and weighed on discretionary spending. At the same time, some states like Arizona have lower electricity costs, leaving less incentive to switch, SunPower’s CEO Peter Faricy has said.
That has hurt SunPower. In July, when the solar-panel maker reported preliminary results for the second quarter, management said the company expected to add 70,000 to 90,000 residential customers in 2023. That was a decline from its prior forecast of up to 110,000.
On Tuesday, Bagri wrote that the “new customer guidance range is largely dependent on incremental bookings in the second half which, given still weak demand, could surprise to the downside.” He sees room for the stock to fall further as estimates “need to come down.”
SunPower is expected to report third-quarter earnings on Nov. 1. The company declined to comment, saying it is in a quiet period ahead of the report.
On an August call to discuss the second-quarter results, Faricy said the company planned to reduce operating expenses to maintain its “financial strength through weaker near-term market conditions.” The company said it planned to lay off roughly 5% of its employees in the third quarter, which ended in September, and reduce investments, delaying hiring in certain projects this year.
Bagri acknowledged the plan in his report but said the firm needs to continue investing in providing services to existing customers as they are “a key strategic priority, which means opex could remain persistently high.” A bigger-than-expected cut to operating expenses would put SunPower’s market share at risk, he said.
Write to Karishma Vanjani at [email protected]
Read the full article here
