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
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Most Expensive Rum Brands in the World

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!