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SunPower Corporation (SPWR), SolarCity Corp (SCTY): What’d You Miss?

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This week was full of fireworks in the solar industry. SunPower Corporation (NASDAQ:SPWR) released 2013 guidance, SolarCity Corp (NASDAQ:SCTY) got a big financing deal, and LDK Solar Co., Ltd (ADR) (NYSE:LDK) finally released 2012 earnings. Best of all for investors, most solar stocks moved significantly higher this week.

SPWR Total Return Price Chart

SPWR Total Return Price data by YCharts

Here are the highlights from this week in solar.

SunPower looks into its crystal ball
During an analyst day on Wednesday, SunPower Corporation (NASDAQ:SPWR) released second quarter and full-year 2013 guidance, as promised (the full presentation can be found here). Here’s what management sees going forward.

Metric Q2 2013 2013
MW Recognized 260 to 280 1.0 GW to 1.1 GW
Non-GAAP Gross Margin 14% to 16% 15% to 17%
Non-GAAP EPS $0.05 to $0.15 $0.60 to $0.80
GAAP EPS ($0.25) to ($0.15) ($0.05) to $0.20

Source: SunPower.

If SunPower can report a GAAP profit for 2013, it would be a major milestone for the company. First Solar, Inc. (NASDAQ:FSLR) is the only other major manufacturer making a profit right now, and SunPower has been posting losses for years as the industry struggled with oversupply.

One of the drivers of higher installations and growing profitability is the leasing business, where SunPower Corporation (NASDAQ:SPWR) competes with SolarCity Corp (NASDAQ:SCTY). So far, it has installed 100 MW of residential solar with contracted payments of $541 million. To put this into perspective, this compares with 333 MW installed by SolarCity and $1.22 billion of contracted payments. I’ll get into what this means in a moment.

One interesting data point: In California, the average customer is paying SunPower Corporation (NASDAQ:SPWR) $0.18 per kilowatt-hr for electricity, with a 1% escalator. This is after accounting for the investment tax credit, but it gives an idea how inexpensive solar power has become.

SolarCity goes crazy
The huge winner this week was SolarCity Corp (NASDAQ:SCTY), the residential and commercial solar installer. The company announced a $500 million financing agreement with Goldman Sachs, and suddenly investors flooded into the stock.

This is really business as usual for SolarCity and will finance 110 MW of the 250 MW the company plans to install this year. As installations grow, so will revenue and net income because the leasing business is recurring in nature. The big difference between SolarCity Corp (NASDAQ:SCTY) and SunPower Corporation (NASDAQ:SPWR) is that SolarCity does all of the legwork itself, and SunPower relies on dealers to find and install deals.

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