Written by Brenda Nakalema

SunPower Stock Gets the Upgrade Due to Clear Growth Signals

SunPower stock surged after the solar panel manufacturer received an upgrade from Bank of America analysts after a “more encouraging …

SunPower stock surged after the solar panel manufacturer received an upgrade from Bank of America analysts after a “more encouraging than expected day,” said some analysts.

Bank of America analyst Julien Dumoulin- Smith put the upgrade on SunPower (ticker: SPWR) to Neutral from its previous “underperform” level and even went ahead to raise his price target to $23 from $15.

“A spotty execution history, gain on sale vs asset holding model, and lofty valuation have made us sceptical in the past,” he wrote. “With that said, today the company is a different story, firing purely on its historically profitable residential segment and with a relatively unobstructed path to growth on an absolute and per-share basis.”

The company’s analyst day was held on March 31st, which according to Dumoulin-Smith, was “more encouraging than earlier expected.” The analyst noted “exceptionally robust tailwinds” in the sector. On top of all this great news, management also announced its expectation of two times the market growth with an adjusted EBITDA per customer of between $3000 to $4000 by 2025, a great performance in comparison to 2022 guidance of $2000 to $4000. With these figures, it is clear to see the EBITDA is well above the Wall Street consensus.

However, according to Dumoulin-Smith, even with this amazing performance, it will ultimately come down to execution. EBITDA improvement depends largely on top-line growth, cost reductions, and margin improvements.

With this in mind, the company signalled its intention to cut customer acquisition costs by 20% over the coming couple of years using data-driven marketing, improving margins and placing it ahead of its competitors.

Management also announced that it would be open to pivoting toward a direct or online sales platform in the place of an in-person sales team. This could potentially be a boon to the company, especially if management makes the decision to roll out its budget panels sales program in the coming months, which will be crucial in developing the direct sales program.

“The question in our view is whether this Direct channel will be able to maintain the premium pricing that SPWR has enjoyed vs peers if more directly competing head-on with largely independent peers at a much lower price point,” he wrote.

SunPower stock gained roughly 12% on Monday to $24.04. The stock has risen about 15% this year alone. Although analysts remain cautious about the stock; 71% rate it a Hold, 12% rate it a Sell, and 18% rate it a Buy.