SunPower Corporation (NASDAQ:SPWR): The technological leader
SunPower Corporation (NASDAQ:SPWR) is the nation’s second largest solar panel maker. It is 66% owned by French oil giant Total, and, while SunPower Corporation (NASDAQ:SPWR) has not turned a profit since 2010, the waiting for Total and other shareholders is very likely over.
Like other large panel makers, SunPower Corporation (NASDAQ:SPWR) is completely integrated as it designs, manufactures, sells and installs solar systems. It claims to have the highest quality product, both in terms of maximum efficiency (21.5%) and smallest footprint. Its panels sit on over 100,000 building roofs worldwide, and it is in the process at this time of constructing two of the largest utility scale plants in the country, collectively known as the 580 megawatt Antelope Valley facility.
By its rather dismal recent financial standards, SunPower Corporation (NASDAQ:SPWR) had a banner first quarter. Sales in the quarter of $634 million blew away the company’s stated expected sales of from $450 million to $525 million. GAAP earnings came to a loss of $54.7 million, or $0.46 per share. But adjusting for a myriad of one-time factors, and non GAAP the company had earnings of $0.22 per share, swamping analysts’ expectations of six cents per share in the quarter. On May 15 the company issued guidance for the balance of the year, with non GAAP revenues of roughly $2.55 billion, and non GAAP earnings of $0.60 to $0.80 per share.
It would seem that this company has turned a corner, and this has been rewarded in the market as the company’s stock is up nearly 3-fold over the past 52 weeks. But I believe the stock price has gotten a little ahead of itself, and would be more comfortable endorsing a purchase of this issue in the mid-teens.
First Solar, Inc. (NASDAQ:FSLR): The 800 pound gorilla looks to move beyond utility scale systems
The largest solar development company in the country is First Solar, Inc. (NASDAQ:FSLR). It had a very solid first quarter, with revenues of $755 million, up 52% from last year’s first quarter. Profits came to $59.1 million, or $0.66 per share. Adjusted earnings were a bit higher at $0.69 per share. Analysts had been expecting earnings of $0.75 per share.
First Solar, Inc. (NASDAQ:FSLR) has always stood out from the other solar makers due to utilizing a proprietary thin film design containing cadmium telluride in its panels, rather than the more typical silicone panels. The good news is that First Solar, Inc. (NASDAQ:FSLR)’s panels are cheaper to produce. The bad news is that they are also less efficient, though the company’s newest panels come in at a respectable 16% efficiency. Since First Solar’s systems have required more panels to yield the same energy, its systems are not rooftop friendly, and First Solar has been utility-scale focused. However, it recently acquired Tetra Sun, and in time should use that company’s cutting edge copper monocrystalline silicon panels, which fit precisely with distributed energy system needs. It won’t be until roughly 2015 that these panels can be brought to market, but with First Solar, Inc. (NASDAQ:FSLR)’s utility expertise and new potential system, the company will have all bases covered.
The future is hazy with the solar industry, as new technological breakthroughs are always possible. A 40% efficient silicon panel system has been developed, but that is far from being commercially available. Unless something like that makes First Solar, Inc. (NASDAQ:FSLR)’s technology antiquated, this company has a bright long-term future.
SolarCity Corp (NASDAQ:SCTY): Can Elon Musk do what he has done for Tesla Motors?
SolarCity Corp (NASDAQ:SCTY) went public in December of last year. The company, led by Elon Musk of Tesla Motors Inc (NASDAQ:TSLA) fame, has had a relatively meteoric rise, climbing in six months from $8 per share to nearly $50 per share. The latest boost was due to a rosy revenue figure in the first quarter of the year. On a GAAP basis, revenues were about 20% from the first quarter of last year to $30 million, beating Wall Street estimates of $29 million. But the company argues persuasively that since the bulk of its sales are actually 20 year leases, GAAP revenues and earnings defy reality. It is also not as exposed to solar panel pricing issues as it is not a manufacturer. It is a designer and installer of custom systems for homes and businesses.
SolarCity Corp (NASDAQ:SCTY) lost $31 million in the first quarter, or $0.41 per share. It is selling for 25 times sales, and by any common measure it is overvalued. Musk may have a golden touch with electric cars, but that does not necessarily mean anything for energy. I would avoid Solar City at any price within half of where it is as I write this, or about $24 per share.
Enphase Energy Inc (NASDAQ:ENPH): An infrastructure supplier to the solar industry
California’s Enphase Energy Inc (NASDAQ:ENPH) is a niche player in the solar industry, with its main product being the inverters that help convert the sun’s direct current into grid compliant alternating current. Therefore, its financial health is entirely dependent on the steady growth of home and business solar systems.
The company struggled in the first quarter with a loss of $10.4 million, roughly the same as last year. But the company also supplied a rosy view of the quarters ahead both in revenue and in margins. Analysts see the company swinging to profitability in 2014. I believe more strongly in solar than in wind as a baseload power source going forward, and can see Enphase Energy Inc (NASDAQ:ENPH) having a role in this growing distributed energy trend. It makes a fine choice for the risk-tolerant investor.
Conclusion
Solar energy, whether distributed or utility scale, is a permanent and growing part of our electrical generation worldwide. There is room in the industry for many players, yet with risks of technological change (First Solar) or another financial recession collapsing the housing market (Solar City) the industry is obviously not without peril. Tread with care.
The article The Solar Industry Welcomes Growth, But Investors Beware originally appeared on Fool.com and is written by Bill Edson.
Bill Edson has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Bill is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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