Why SunPower's Impressive Momentum Will Continue

SunPower (SPWR, Financial) is making tremendous progress in the commercial footprint. For example, the company had recently declared that it has in place a purchase agreement of 68 megawatts with 20 years PPA signed with Stanford University. This is one of the largest PPAs signed by a U.S college or university upon completion. This project will supply more than 50% of their projected annual electricity needs.

Catalysts to watch

Additionally, it has entered into a partnership with Stem, a well-known leader in the intelligent storage solutions. The company will be in a better position to help the new as well as the existing U.S. commercial clients to further eliminate their cost of energy as it plans to effectively utilize Stem’s solution for demand charge reduction. Also, this strategy should bode well with its energy-intelligent software offer from EnerNOC. So, SunPower has a complete set of solutions, products, marketing strategies and costs benefits for its customers that should help the company to gain additional market share and increase the value for shareholders in the future.

Apple (AAPL, Financial) should add much required quality to its already efficient solar module that should enhance its competitiveness. On the other side, the Chinese solar market remains pretty attractive, offering the company a much wider platform to maximize its top as well as bottom lines and create value for its shareholders. As per a published report, the Chinese solar market has total estimated power capacity of 1,360 gigawatts. In fact, the Chinese solar capacity market registered massive 60% growth in the financial year 2014.

However, China is expected to add another 15 gigawatts of solar power capacity in the financial year 2015. This is significant contribution to its total power capacity and should enable the solar companies to have their slice of cake rigorously. In addition, China remains on track to increase its shares of non-fossil energy to 15% in overall power consumption by the end of 2020. This was about 11.1% in 2014. So, the overall picture of solar market remains quite positive in China that should benefit SunPower in a big way going forward.

Moreover, the company is well positioned to tap this opportunity with its strategy of smart energy capabilities. It has recently launched new products to its already attractive product pipeline under this strategy. These new products will help the company to tap the commercial solar market more aggressively, while extending its reach in the residential hoof marks.

Conclusion

SunPower is a good bet. It has a lot of upside potential that should enhance shareholders value in the future. It is aggressively expanding its power plant and residential footprint. Also, it is executing well on its costs and technology road maps along with added assets to its Holdco strategy. So, the company should benefits from these enhancements this year with growing demand for renewable.

Moreover, the stock shares cheap valuation. It has forward P/E of 19.24, which is below its trailing P/E of 27.97. This indicates great prospects for its earnings growth in the future. Its balance sheet carries total cash of $601.57 million and has total debt of $1.15 billion.