SunPower (SPWR) Stock: Collapses on Poor Results

SunPower Corporation (NASDAQ: SPWR)

SunPower is having an overwhelmingly bad day in the market today, and for good reason. The company recently released its results for the second quarter; beating expectations but slashing guidance, and announcing layoffs. Today, we’ll talk about the news, how the stock reacted to the news, and what we can expect to see from SPWR moving forward. So, let’s get right to it…

SPWR Concerns With Q2 Results

As mentioned above, SunPower Corporation recently released second quarter results. While earnings and revenue both came in ahead of expectations, the company concerned investors with announcements of lay offs and poor guidance. Here’s what we saw…

  • Earnings Per Share – In terms of earnings per share, SPWR did relatively well. During the second quarter, analysts expected that the company would produce a loss of $0.24 per share. However, the company actually reported a slightly narrower loss at $0.22 per share.
  • Revenue – Another area where SPWR did incredibly well was revenue. During the second quarter, analysts expected that the company would generate $345.08 million in total revenue. However, the company actually generated a total of $420.5 million; once again, beating expectations.
  • Guidance – One of the big concerning areas of the Q2 results was that SunPower has decided to slash its guidance for the year 2016. Previously, the company guided that for the full year of 2016, the company expected to earn up to $50 million during the year. However, the company now says that it will likely lose up to $175 million in the year 2016.
  • Restructuring – Another big announcement that was made today was that the company will be restructuring in a big way. Early this morning, the company announced that it will lay off 1,200 employees. As a result, SPWR encur restructuring costs of between $30 million and $45 million.

During the release, Tom Werner, CEO and President at SPWR had the following to say in a statement, leading to further near-term fears among investors…

“However, while the long-term fundamentals for solar power remain strong, we see a number of near-term industry challenges, primarily in our power plant segment, that we expect to impact our business and financial performance in the second half of 2016. The extension of the Investment Tax Credit, as well as the bonus depreciation credit, while beneficial to the long-term health of the industry, has reduced the urgency to complete new solar projects by the end of 2016, with many customers adopting a longer-term timeline for project completion. Additionally, near-term economic returns have deteriorated due to aggressive PPA pricing by new market entrants, including a number of large, global independent power companies. We are also seeing customer project IRRs rising in the near term as buyers have increased their hurdle rates due to industry conditions. Finally, the continued market disruption in the YieldCo environment has impacted our assumptions related to monetizing deferred profits.”

How The Market Reacted To The News

While the earnings release was relatively positive in terms of earnings per share and revenue for the second quarter, there are still several concerns with regard to SunPower’s performance ahead. Unfortunately, with slashed guidance and a restructuring plan that seems like a desperate move to save money, investors are losing faith. As a result, we saw massive declines in the value of the stock today. By the end of the trading session, the stock had fallen to $10.31 per share after a loss of $4.47 per share or 30.24%.

What We Can Expect To See Moving Forward

Moving forward, I have a relatively mixed opinion of what we can expect to see from SPWR. In the short term, things are looking grim. The company has a massive hurdle to make its way over with regard to expenses associated with restructuring as well as expected losses throughout the year. However, in the long run, the company still has a chance to turn things around.

What Do You Think?

Where do you think SPWR is headed moving forward and why? Join the discussion in the comments below!