SunPower stock has declined by about 37% year-to-date and remains down by about 29% over the last 12 months. There are a couple of factors that have weighed the stock down recently. Firstly, SunPower’s Q1 2023 results fell short of expectations. Although revenue grew by 32% year-over-year to $442.5 million, the company posted a net loss of $0.07 per share. SunPower has also traditionally been a very volatile stock, prone to boom and bust cycles. While the stock saw a big rally through the early Covid-19 pandemic driven by the government stimulus, it has corrected recently as rising interest rates over the last year or so impacted high multiple stocks. Moreover, while the residential solar market that SunPower caters to is growing strongly, it appears to be underperforming other segments of the solar market. Over Q1 2023, utility-scale installations increased 66% from the first quarter of 2022 to 3.8 gigawatts, compared to residential solar additions which rose 30% to 1.6 GW. Recent changes to the net metering policy in California – the U.S. state with the largest solar installations – is also likely impacting the outlook for residential solar players.
However, there are probably some good reasons to look at SunPower stock at current levels of $11.60 per share. SunPower trades at just about 32x forward earnings. While this is somewhat high in the current interest rate environment, SunPower’s growth outlook remains relatively strong with revenue poised to grow by over 20% this year per consensus estimates. The company is targeting customer growth to the tune of 90,000 to 110,000 new customers for this year, compared to about 83,000 last year. Moreover, the company is looking at roughly 2x the market growth by 2025. The economics of rooftop residential solar is also looking up given the rising prices for residential electricity from the grid. For instance, U.S. retail electricity prices rose 15.4% year-over-year as of February 2023 making investments in residential solar installations more viable for consumers. We value SunPower stock at about $15 per share, which is about 30% ahead of the current market price. See our analysis of SunPower Valuation: Expensive or Cheap for a closer look at what’s driving our price estimate for the company. Also, see our analysis of SunPower Revenue to better understand the company’s revenue streams and how they have been trending.
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