Bull vs. Bear: What Is the Future of SunPower Corporation (SPWR)?

Long time Foolish followers know that I have been a believer in SunPower Corporation (NASDAQ:SPWR) since long before the stock became one of the hottest on the market. The company’s recent swing into an adjusted profit and guidance of a likely GAAP profit this year have only bolstered that opinion, and the market has responded by sending the stock up fivefold in the past six months.

But for every bull there’s a bear, and since we should always value seeing the other side of a stock, I scoured our Foolish ranks to find someone who could make a solid case for being negative on the stock. Today, Matt DiLallo and I will debate the merits of SunPower Corporation (NASDAQ:SPWR) in hopes of presenting both sides of this solar stock.

Matt DiLallo: The bear case for SunPower
I must be upfront: I’ve been burned by solar in the past. So far, all three of my attempts to invest in the industry have gone up in smoke. While I see the industry’s bright promise, that glowing allure has yet to lead into solid long-term returns for investors.

I see that same allure when considering an investment in SunPower Corporation (NASDAQ:SPWR). It stands before the $2.2 trillion electricity market and sees nothing but opportunity, yet that opportunity comes with a cost. The solar industry has developed to the point where it’s past the early adopters who have a personal drive to “go green.” The vast opportunity that’s now before the company, and its industry peers, is the mainstream customer base whose incentive is another kind of green: saving money.

That’s a real problem for the company, which has developed a panel that’s far superior to a typical commodity solar panel. It’s more reliable, it performs better, and it’s much more efficient. Truly, this is a premium product — and with it comes a premium price.

Source: SunPower investor presentation.

The cost differential of a SunPower Corporation (NASDAQ:SPWR) system against its commodity competitors will remain an obstacle to growth. As more mainstream customers “go green,” SunPower must prove that the premium for its product is worth it. If I were to invest in solar, I’d be looking at a low-cost producer, not the seller of a premium product in an increasingly commoditized industry.