Among the worst-performing stocks today (and a big underperformer for the year), SunPower (NASDAQ:SPWR) continues to provide many investors with some heartburn. Shares of SPWR stock are plunging more than 17% in afternoon trading after the solar provider noted that it will need to restate its financial statements.
Obviously, any time a company suggests that a restatement of its previously released financial statements is necessary, some selling pressure is to be expected. Indeed, a decline of 17%, while steep, is one that certainly makes sense when investors zoom out on this stock. Starting the year at more than $17 per share, SPWR stock has since sunk to around $4 per share at the time of writing. That’s a decline of more than 75% on a year-to-date (YTD) basis alone, signaling just how bearish investors have gotten on this stock.
Let’s dive more into what investors should consider when it comes to this news — and what may be ahead for SunPower moving forward.
SPWR Stock Plunges on News It Will Need to Restate Financials
It’s worth noting that not all restatements of financials are a negative for specific companies. Various firms may be forced to restate previously released financial statements for a myriad of issues, from purely technical concerns to material inconsistencies.
In the case of SunPower, it appears the company’s errors in its previous financial statements (for all of 2022 and the first two quarters of this year) amount to material issues. As the company noted:
“In connection with the preparation of the financial statements, the company preliminarily determined that the value of consignment inventory of microinverter components at certain third-party locations had been overstated in the affected periods in the range of approximately $16 million to $20 million, resulting in the associated cost of revenue being understated.”
In other words, SunPower was reporting gross margins that were $16 million to $20 million higher than it should have been. That’s not good.
The solar industry is a highly competitive space and financials matter to investors comparing companies across this sector. If investors broadly lose faith in the integrity of a company’s books, that’s really a negative in industries such as this. Thus, this is a stock I think investors ought to be cautious with following this news — and this selloff appears to be reasonable given the context.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
