I wouldn't say that because they could surprise in coming quarters with higher-than-expected gross margin, higher earnings, or even a bigger pipeline of projects. They also have a high short interest. So, the stock could move (in either direction) based off of sentiment and momentum.
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Alternative Energy Investor Discussions
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I wouldn't say that because they could surprise in coming quarters with higher-than-expected gross margin, higher earnings, or even a bigger pipeline of projects. They also have a high short interest. So, the stock could move (in either direction) based off of sentiment and momentum.
Any reason for the short interest? They're making money and even if they don't have big growth, they don't look in danger of dying.
I'm not sure. But there was a time not too long ago where it seemed solar was stagnant and lots of solar companies would go bankrupt because of debt and oversupply. It's likely shorts aren't impressed by solar's future (ie, they're loyal to coal and natural gas).
The stock will not stay flat and then start to grow quickly. The market prices these things in gradually, so I expect a steady climb for SPWR to the $40-$50 range next year and then $60 two years from now if they execute on their strategy. If you wait till next year to buy SPWR then you will probably have to pay more for the stock, and it is not likely that the stock will start going crazy next year. SPWR is becoming a more mature company and the easy money was to be made this year.
If SPWR does reach $60 in 2 years, that is still an awesome result because stocks don't normally double every two years.
In the short run there might be a big pullback in SPWR, but I am not sure that is actually going to happen. I liked the results a lot, the only thing I am disappointed in is that the growth will not come super fast, so the stock probably won't double in the next few months. The company will grow gradually and so will the stock price.
People dismissed a lot of other important factors they mentioned on the CC. E.g. someone asked why residential leases are slowing down and SPWR answered that basically they can pick and choose where to send the panels, and they want to be geographically diversified. So you have to remember that there are positive sides of being sold out, such as charging more, and having the opportunity to decide whom to sell the panels and/or systems.
They also mentioned on the call that they will be doing more C7's next year; and this makes a lot of sense to me. Even though they have 1.2GW of capacity, they could hypothetically get close to 5GW thanks to their concentrated product. Since they are maxed out, why not push for more C7 sales. If only 10% of their panels go into C7 next year, then instead of 1.3GW's, you will get 1.7GW's. Don't know if 10% is doable (for 500MW after concentration), probably not next year, but if they really push the product there is still a lot of high growth that can happen in a short period of time.
Overall, I see this CC as very positive for the buy and hold investor. SPWR is profitable at $1.5/share this year. Unfortunately, they gave low guidance for 2014 of "at least $1/share". Since they are sold out and made $1.50 this year, I would hope that they can do at least $2 next year. Sandbagging will not help the stock price in the near future, but does prevent bubble-like pricing, so that is a good thing for shareholders.
They also had (on their May analyst day presentation) a goal to reduce x-series panel costs by 35% by 2015 and to make them 5%-10% more efficient. That should give them a good GM boost especially since ASP's have stopped going down worldwide. Cost cutting alone should help the bottom line next year, since they even said that they exceeded their cost cutting targets for Q3; as they always do.
It is still a growth stock in a growth industry. They said that they reached over $200m of positive cash flow in the first 9 months of this year, with a weaker Q1. So they can probably do $300m - $400m free cash flow in 2014. The new fab4 will only cost them $200m, so they could build two new ones with the cash they make next if they needed to (of course this won't happen, but just shows how easy it is for them to grow with internally generated cash).
One thing is for sure, and that is: solar is the future. I like SPWR a lot and I think it is a great buy for the buy and hold investor. SPWR was able to achieve all this in a year where global demand will be ~37GW, and the first half had soft industry conditions. Next year demand estimates are showing 45GW - 55GW, and these are based on what individual countries have targets for. The demand estimate for 2013 was as little as 31GW just 6 months ago, now it is up to 37GW. No telling what next year's demand will actually turn out to be, but as long as the global economy continues to expand, I think that 45GW will turn out to be too low.
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The difference between SPWR and TSLA is that TSLA is expected to grow at 100% per year and is priced for that growth rate. If TSLA only grows 80% per year, the stock might go down a lot. Whereas SPWR is priced to grow 15%-20% per year. If they can deliver 30% growth, the stock might double in a short period of time.
Numbers are only for illustrative purposes, but my point is that many people here got spoiled by TSLA the stock and the company's growth rates, that they are quick to dismiss any company that isn't growing at a 50%+ annual rate.
All growth stocks are priced according to the markets expectations of that growth. If you think that a company can exceed the market's growth assumption then you should invest in that company. I think that SPWR has a better chance of exceeding the market's growth assumption than TSLA does. And I like TSLA a lot, so I like SPWR a little more.
SPWR is trading on 20X this years earnings. The S&P is now around 16x this years earnings. TSLA is still trading on 100x next year's earnings (will probably turn out to be a little less in reality, but that is analyst consensus). So even though SPWR has a slight growth premium built into the stock price, it really isn't that big of a premium. As long as they execute there will be a floor on the stock price. I am still very bullish on the company and the industry.
Thanks sleepyhead. Sounds good. My Nov16th options are going to hurt since SPWR is down heavily premarket. I bought the options a few weeks ago and without looking at when the earnings call was at the time, so they purchased weren't with that purpose. At the time I was under the confusion that a "short term" option meant weeklies, so I bought a "longer term" option at about 5-6 weeks out. Not nearly long enough, but I didn't realize what people meant by short and long term when it comes to options at that point.
I've got til the 16th, so hopefully SPWR will rise when solar in general spikes and I can get out with enough to make it worth reevaluating for a stock/LEAP purchase. Doing that for all my options I suppose.
I've got til the 16th, so hopefully SPWR will rise when solar in general spikes and I can get out with enough to make it worth reevaluating for a stock/LEAP purchase. Doing that for all my options I suppose.
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In reading the CC, the CEO mentioned several times they prefer markets with few subsides and no favorable policy. It seems the US is slower to catch on to solar than the rest of the world. I'm guessing this is due in part to having cheaper coal and in part solar has a stigma of being expensive and for greenies. It will be interesting to see when that perception changes in the US.
Thanks for the great insight, Sleepy.
Thanks for the great insight, Sleepy.
Mario Kadastik
Active Member
Well thanks to SPWR report and mixed feelings by Wall str, the whole solar sector is suffering today 
Stocks are down -2..-10% across the board.
Stocks are down -2..-10% across the board.Yea, disappointing. Timing is everything. If I'd gotten in 6 weeks ago around 9/20 then the last couple weeks of steady decline would just be unfortunate, but options would all be well in the green. I got in just 10 days later and given the premiums it's a very different picture. Unless you've got some sort of inside info, it really highlights how pointless it is to time the market.Well thanks to SPWR report and mixed feelings by Wall str, the whole solar sector is suffering today
Mario Kadastik
Active Member
Well I used many of Sleepys good entry ideas where we had confirmation of breakout about to happen (got in CSIQ just as the $16.5 was broken). So I do have some like SCTY and CSIQ that are still nicely in the green as well as some that are relatively flat (SOL, STRI) and some of course where I could have entered earlier (JASO, JKS) and now got some small loss in SPWR, but overall my solar holdings (all options, all LEAPs or March 2014) are in the green because SCTY and CSIQ are my biggest holdings and third biggest SPWR is right now only slightly in the red (got in early enough).
I'm far far more in the red with TSLA various options and have to just hope that we get to $190 post ER to get into green.
I'm far far more in the red with TSLA various options and have to just hope that we get to $190 post ER to get into green.
TSLA options are about 1/2 of my short term investment money. Amusingly enough, part of why I diversified into multiple solar options (and KNDI) rather than just Tesla was to diversify so that I wouldn't lose all my short term investment money if TSLA turned south. Yes, that was a cunning plan
JKS seems to be bucking the solar trend today.
InTheShadows
Active Member
So my 50/50 goal was reached a few days ago but not in the way I had intended it to happen. Tsla has dropped more than my solar holdings so now I have more solar than tesla.
That is the beauty of diversification. Keep us updated on how the proportions change over time.
mershaw2001
I'm short the short sellers
I am very positive on SPWR after skimming the earnings. I sold in the money puts out a few months- i think it will recover what it has lost, i think it will be trading around 34 until the next earnings. (dec 33 puts for 4.85 if anyone cares)
I liked the earnings too. Everybody is focusing on the "soft" guidance. Whoopydoo! They always give soft guidance:
Q2 guided towards $0.05-0.20 EPS. Actual $0.48
Q3 guided towards $0.15-0.35 EPS. Actual $0.44
Q4 guided towards $0.15-0.35 EPS. Actual...
I think you get the drift.
Norse
Active Member
Massive strengt here, SPWR might end up in the green today if this continues..
Lets not get carried away. Although that would be pretty amazing.
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This article represents my exact thought process on SPWR and I completely agree with this author on virtually everything he wrote:
http://www.fool.com/investing/general/2013/10/31/behind-the-numbers-at-sunpower.aspx
I agree with most of what the author writes. I think SPWR is one of the strongest solar players out there and will likely continue to grow as solar grows. The two items of concern for me long-term for SPWR that might limit their growth is:
1. Lack of market focus - as the author points out, they're in utility, commercial and residential. I'd say that it's tough to do all those markets well. On the flip side, they could pull resources toward the markets that do well.
2. Lack of super high-growth - capacity limits them and while expanding to Fab4 helps increase capacity by 35%, it still won't be realized until 3 years from now. It's tough to give a very high multiple to a company that's restrained in growth.
These two reasons are why I'm more bullish on SCTY long-term. SCTY is one of the most focused solar companies out there. They're focused on the residential market in the U.S. in the states where it makes the most economical sense to go solar right now (and they're expanding as the value proposition for solar grows with reduced costs). Eventually, they'll go international IMO but to scale a company I prefer the initial laser focus approach that SCTY has. It shows a lot of promise. Also, SCTY is growing installs at a 100% YOY rate and will likely continue this growth rate over the next few years. This is truly amazing. And they claim they're on a path to get 1 million customers within 5 years. SPWR, FSLR, Tier 1 Chinese solars - nobody can match the growth rate of SCTY, or even come close. In the short and mid-term, who knows where SCTY will trade because it'll be volatile as the whole solar industry tends to be. But I'm bullish long-term on solar and while I think SPWR and others will do well, I just think SCTY is in a different league.
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