Analyst Suspicious of SunPower's (SPWRA) Margins; Sees Downside Pressure in '09

An analyst at Hapoalim Securities is out with a research note reviewing SunPower's (Nasdaq: SPWRA) Q3 earnings, which were reported this morning before the market opened. The firm currently does not have an analyst that covers SunPower's stock, but Hapoalim has been negative on solar stocks recently, giving the sector an Underperform rating.

According to the analyst, SunPower beat the Street's earnings estimates "on elevated demand from Germany and Spain ahead of subsidy revisions next year". On the other hand, Hapoalim points out that this was largely expected given "demand pull-in ahead of large subsidy cuts in the two largest solar
markets" -- Spain and Germany.

The firm believes the following four points more accurately reflect SunPower's story moving forward:

• the company's CY09 GAAP EPS guidance, which was below the Street consensus, is concerning as SunPower has always been a "beat and raise" story.
  
• SunPower's CEO, Tom Werner, has still not admitted that the company could feel an impact from the credit crisis over the next several years.
  
• accounts payable rose materially during the quarter, "implying interest expense could exceed expectations". Essentially, this means that SunPower is borrowing a large amount of short-term debt, which "does not bode well for the future as the interest expense on this debt is at an all time high."
  
• SunPower has noted that the ITC tax credits will be positive to results in CY09, yet, as Hapoalim has pointed out previously, most banks and solar project funding vehicles are operating at a loss this year, meaning that they will not be able to use the 30% credit as "you cannot offset a net loss with a tax credit..."

Hapoalim says that SunPower's results underline its negative thesis on the sector "as the company has not yet adjusted margin guidance to reflect the unavoidable pressures [related to the credit crunch] that are coming next year."

Shares of SunPower are currently trading 7% higher on the earnings news. The stock most recently traded at $43.90.

SunPower Corporation engages in the design, manufacture, and marketing of solar electric power technologies.

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