SunPower (SPWR, Financial) selected to partner with First Solar encouraged by the latter’s enormous operating experience of approximately 40 years, 16 gigawatts of total installed capacity and a solid balance sheet. Moreover, both these power majors have a well diversified set of project assets depending on superior business models and proprietary technologies.
This key vehicle is believed to improve the abilities of both the companies to build and finance projects and hence deliver improved shareholder returns with the expanding worldwide adoption of renewable energy.
Growth across the globe
Globally, SunPower is significantly and quickly implementing its projects in Chile, South Africa and France where its merchant plant got completely connected in the quarter. SunPower also eyes significant growth potential in China which is believed to be the world's major solar market by strategically developing its two key joint ventures.
The accelerated implementation of several key projects across the selected countries globally supported by the company’s robust balance sheet is forecasted to significantly benefit the shareholders, going forward.
For Distributed Generation, SunPower witnessed robust demand in both the U.S. and Japan residential market. There were solid bookings in its North American commercial business where its established relationships with key customers allowed many recurring wins and SunPower expanded its commercial pipeline to $1.4 billion.
Overall, SunPower made noteworthy investment in its smart energy strategy for Distributed Generation.
The rapidly increasing demand for the distributed power generation of SunPower in the major markets of Japan and the U.S. is forecast to significantly expand the company’s top line and hence improved shareholder returns.
SunPower seems to be in a robust financial position with several strategic loans for its projects, which are valued over $1 billion in North America. The power major has also started the development of its innovative power plants like the Xcel Energy in Colorado, Quinto project and several others as well. Moreover, SunPower has also made huge progress in expanding globally as well with the successful deployment of 33 MW project in South Africa. In addition, SunPower has won another significant 85 MW project in the area. It also has comparable projects under progress in China, Japan and Chile.
SunPower has formed Huaxia Concentrated Photovoltaic Power joint venture with three key companies in the area to successfully implement its solar concentrator technology. SunPower also aims at expanding its strategic joint venture with TZ group, which is believed to be a key member in the partnership that is expected to support SunPower in tapping the power potential of approximately 1GW projects in different provinces of China.
The solid projects pipeline developed by SunPower globally coupled with impressive execution of strategic partnerships with several other power players signifies the effective growth strategy of the company.
Further, SunPower has partnered with KB Home (KBH, Financial) for installing solar systems as well as battery storage facilities in the latter’s developed homes. This project is successfully running in inhabited towns of Australia, and the company also has plans to expand its reach to commercial customers. Actually, SunPower is continually being selected as the unique solar provider in the U.S. at several top international automotive companies.
Moving ahead, SunPower has acquired a CRM software suite called SunPower Spectrum and DG project management to excite its dealers with innovative service offerings as well as enhancing its customer experience ranging from prequalification during installation and after-sale support.
The major strategic partnerships of SunPower along with superior customer experience for its unique products and services is estimated to significantly expand the new customer base while maintaining its already robust current customer base.
Improving capacity
SunPower has also planned to grow its production capacity by over 50% from present levels. Its Fab 5 facility is believed to initiate production in 2017, and forecasts to deliver approximately 700 MW of solar panels annually. According to Bloomberg, overall industry shipments are estimated to enhance over 29 percent to approximately 52 gigawatts for this year. Further, SunPower’s Fab 4 facility in the Philippines is forecast to initiate production during early next year, which finally is believed to expand its production capacity to over 350 MW.
The consensus estimate among 15 polled investment analysts evaluating SunPower Corporation suggests the company to outperform the market. This rating is maintained since the investment analyst sentiments enhanced in May 2013. The earlier consensus estimate suggested investors to hold their position in the company.
The significant expansion plans of SunPower coupled with improved sentiments of the investment analysts suggests that the company is on the right track to expand growth and deliver superior shareholder returns.
Conclusion
Finally, the investors are advised to invest in the SunPower Corporation looking at the company’s impressive valuation levels with the trailing P/E and forward P/E ratios of 21.30 and 18.36 respectively. The PEG ratio of 11.38 indicates slower company growth compared to solid industry’s average of 0.87. The profit margin of 8.12% is also satisfactory. Diluted EPS of 1.55 is much above the industry’s average of 0.38 only, depicting solid shareholder earnings. However, SunPower needs to optimize its debt-laden balance sheet with total debt of $1.33 billion against poor total cash position of $956.17 million only to avoid any hindrance in significant prospective growth investments.
