Caving To Competition? Auriga’s Mark Bachman Uncovers The Sunpower (SPWRA) Serengeti Low Efficiency Product Line

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08:00:09 pm on May 3, 2010

In a press release this morning, Sunpower (SPWRA) touted its new high efficiency E19 solar panels with an efficiency of 19.5%.  Behind the glitz, glamour and press releases of being a world leader in high efficiency solar cells, there is an ugly side.  That ugly side comes in the shape of competition .. from Chinese manufacturers willing to sell less efficient panels at a much lower price.  Isn’t global competition wonderful?  Not for many US manufacturers and that includes solar manufacturers.

One example is Evergreen Solar (ESLR) which is having a heck of a time turning in a profit by manufacturing here in the US.  They are now in “if you can’t beat ‘em, join ‘em” mode and in the process of shipping manufacturing overseas to China to a large extent.  First Solar (FSLR) has certainly seen some erosion from China manufacturers as well, but they continue to do relatively well for now.

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As Auriga’s Mark Bachman pointed out to us this morning in a new research note, Sunpower (SPWRA) is “joining them” as well, but choose to do it behind the scenes.  It would appear based on Mark’s research that they prefer to maintain the lofty image of high efficiency, word class solar leader, while selling cheaper, less efficient, outsourced modules out the back door. 

Bachman indicates that there was no press release for this Serengeti product line and no search result within the company website but found the product page http://us.sunpowercorp.com/serengeti/ through an internet search and was able to confirm through engineers that the product was available to commercial customers.  The 14% efficiency modules use 3rd party parts and are outsourced using contract manufacturing which Bachman believes will further erode margins.  He maintains his Sell rating and $15 price target.

The conference call after earnings on May 11th should be mighty interesting.  As far as the technicals on SPWRA go, this is a stock that still looks mighty sick and just may hit Mark’s $15 price target in the coming days.  Despite a steady plunge over the past 6 months to new all time lows, I don’t see any evidence at this time that the stock has begun to stabilize down here.  While the expectations are low, which could lead to an upside earnings surprise, I’d stay away from Sunpower for now.

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