3 Reasons SunPower Corporation (SPWR) Is Leading the Charge in Solar

Page 1 of 2

Shares of SunPower Corporation (NASDAQ:SPWR) are exploding higher again today, continuing a wild run the stock has been on since late 2012. SunPower hasn’t been the only stock moving higher over the past three months, but it is one of the biggest movers.

SunPower Corporation (NASDAQ:SPWR)First Solar, Inc. (NASDAQ:FSLR) has also moved higher as sentiment for solar has improved, but not in the same fashion. Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP) , the Chinese giant, is having a good year as well, although leverage is playing a big role in that.

SPWR Total Return Price Chart

SPWR Total Return Price data by YCharts.

I think this is just the start for SunPower, and here are the three biggest reasons why.

Efficiency
What separates SunPower from the competition is the efficiency of its panels. SunPower has panels that are 21% efficient when most module makers are selling traditional panels in the range of 15% to 16% efficiency. First Solar has conversion efficiency of just 12.7%, which is why the company focuses on projects where it can reduce balance of system costs and make the cost of electricity competitive.

The advantage of efficiency is that you can get more power from the same installation. There’s little need to increase the cost of wiring, inverters, land, or permitting — just use a more efficient panel. As the cost of panels have become a smaller percentage of the total cost to install solar this is a key, particularly in the residential market.

GTM Research estimated that the average cost for a Chinese best in class solar module during Q4 was $0.59 per watt. That would be a component cost that goes into an installation that on average costs $5.21 per watt in a residential setting, or $2.40 per watt for utility scale (Q3 2012 the latest available). If the cost of the module is a relatively small percentage of the total installation cost, it’s worth upgrading to a more efficient one, even if it’s more expensive. I ran through an example that illustrates how a more efficient panel will actually save money in an article found here.

Balance sheet
SunPower doesn’t have the best balance sheet in the world, but compared to other solar manufacturers, it looks like a model citizen. Cash stands at $504 million with $839 million in debt. Keep in mind that non-GAAP gross margin stood at 18.7% last quarter.

Compare that to Chinese rivals, and SunPower looks great. Suntech Power had net debt of $1.6 billion as of the first quarter of 2012, the last time we got detailed financials. Considering that the company has lost tens of millions since then, it’s safe to say the balance sheet has gotten worse.

Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE) had $1.9 billion in net debt as of the third quarter and reported a negative gross margin of 22.7%.

LDK Solar Co., Ltd (ADR) (NYSE:LDK) makes even Chinese companies look bad, with $2.7 billion in net debt and a negative 11.2% gross margin. There’s no way the company can dig out of that hole without a handout from the Chinese government.

These three stocks have risen along with SunPower over the past three months, but they show no signs of making a profit, and they have no discernable way to pay off current debt loads. SunPower, on the other hand, has relatively little debt, positive margins, and the backing of oil giant Total even if times get tough.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!