SunPower Corporation (NASDAQ:SPWR) makes a nice solar panel, but like the rest of the sector, it has been hit hard by the oil slump, the slow withdrawal of subsidies and a new administration that prefers fossil fuels.
It was due to report earnings after trading May 9, with investors expecting a loss of 66 cents per share on $391 million in revenue. That would be close to the revenue mark of a year ago, $384.44 million, and only slightly worse on the earnings side, where it lost 62 cents for the same quarter in 2016.
Since Total SA (ADR) (NYSE:TOT), the French oil giant, bought a majority stake in SunPower, back in 2011, for $1.3 billion, at a time when both the solar and oil booms were well underway, it has lost two thirds of that money, while the value of its own shares have declined about 7%.
Before the report options traders indicated the stock could see a 14% move upward on strong earnings.
We Have a Winner! (Sort of)
The numbers looked good, if you like smaller losses.
The company said it lost 36 cents per share on revenue of $399 million, beat the bottom line estimates by 26 cents per share and the top line estimates by about $15 million.
The company also delivered numbers, going back two years, which seemed to blame the cost of above-market polysilicon for the loss. That cost came in at $29.8 million. The stock was halted pending the completion of the company’s conference call. The results of that call, a negative view of the company’s business over the rest of the year, seemed set to send the shares back down.
SunPower’s production cells achieve 24.1% efficiency with a copper backplate that absorb the maximum amount of power, and resist corrosion.
During the quarter, SunPower signed a joint venture with an existing Chinese partner and Tianjin Zhonghuan Semiconductor Co. Ltd. that could produce up to 5 GWatts of power per year in Yixing, China, west of Shanghai, which remains a fast-growing market due to the country’s notorious air pollution.
Cogenra, which supplies the technology being used in the new panels, was in the news last year for suing SolarCity, now part of Tesla Inc (NASDAQ:TSLA), over the technology used in SolarCity’s coming solar shingles.
Total Vote of Confidence in SunPower
Publicly, Total continues to stand behind SPWR stock, with plans to create 5,000 “solar gas stations,” which just means SunPower panels will provide the electricity needed to run Total’s gasoline stations. Total noted in its release that U.S. production of solar power tripled in four years, to 255 Gwatts, while the price of panels has been cut 70%.
That’s a good summation of the industry’s problems. It continues to meet its own goals for increasing production and cutting costs, but the oil bust has turned most of the fossil fuel industry into a competitor, with oil and gas prices cut in half and the infrastructure needed for it to get to market already installed.
The Bottom Line for SPWR Stock
The irony here is that the solar industry is currently as much a hostage to oil prices as the oil industry itself. The failure of oil to break $50 per barrel, and stay above that figure, means that the premium solar was expecting has not materialized.
That won’t happen soon, either. West Texas Intermediate oil closed at $46.24 on May 9, down nearly 14% from the start of the year, despite OPEC’s efforts to reduce production.
Solar, in short, is suffering from its own success. The energy glut continues, and solar stocks remain in the doldrums.
Dana Blankenhorn is a financial and technology journalist. He is the author of the political polemic Saving Trumpistan, Restoring Democracy, available now at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.