SunPower Corporation (SPWR): Forget This Falling Knife

spwr - SunPower Corporation (SPWR): Forget This Falling Knife

Source: via SunPower

Shares in SunPower Corporation (NASDAQ:SPWR) cratered Wednesday after the No. 2 U.S. solar panel maker slashed its outlook. And investors are right to worry about where SPWR stock can find a floor.

solar stocks to buy sunpower (SPWR)The solar power business has been struggling since last year after the extension of a federal tax credit for solar installations was extended beyond 2016. That relieved pressure on SunPower’s customers to complete projects quickly. At the same time, competition from Chinese solar companies is pressuring prices for power purchasing agreements.

None of this is new, and has been weighing on SPWR stock for some time, but apparently the extent of the damage was underpriced by the market. SPWR stock opened about 30% lower on Wednesday … and that’s after losing 50% of its value in the first half of 2016.

SunPower slashed its revenue forecast and said it now expects to report a full-year loss. Additionally, it announced layoff of 1,200 employees, or 15% of its workforce.

After that kind of carnage, no one cared that SPWR beat analysts’ average estimate in the most recent quarter.

Is the Sun Setting on SPWR Stock?

SunPower suffered a loss of $70 million, or 51 cents a share, in the most recent period vs. year-ago earnings of $6.5 million, or 4 cents a share. On an adjusted basis — which is what analysts care about — the loss came to 22 cents a share. Wall Street was looking for a wider loss of 24 cents a share, according to Thomson Reuters. Adjusted revenue growth of 6.7% to $401.8 million also topped the analyst estimate.

Of course none of that matters now. SunPower slashed its full-year outlook for adjusted revenue to a range of $3 billion to $3.2 billion, versus a prior forecast for $3.2 billion to $3.4 billion. On the bottom line, SunPower expects to record of a loss of $125 million to $175 million for the year.

At some point, the selloff in SPWR stock should adequately price in all the gloom. And any time a stock sloughs off this much value it’s worth at least a cursory second look. The idea is to buy low, after all.

But it’s still too soon with SPWR stock. Let the embers cool before inspecting the damage.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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