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Shares of alternative energy company SunPower (SPWR) have trailed the broader markets by a wide margin for some time now. The stock has fallen by more than 90% in the last decade, valuing the company at $601 million by market cap.
SunPower is a solar technology and energy services provider offering solar, storage, and home solutions, primarily in North America. These solutions include SunVault systems, which are pre-engineered modular solutions for residential applications that integrate solar module tech with plug-and-play power stations and cable management systems, allowing end customers to manage energy production.
SunPower Raises $175 Million
Last week, SunPower announced it raised $175 million in capital financing through a term loan from Sol Holding, a joint venture of Global Infrastructure Partners and an indirect subsidiary of Total Energies (TTE). The term loans include $45 million which was provided to SunPower in late 2023, $80 million in new investment, and a second tranche of $50 million that can be borrowed at a later date, subject to certain conditions.
In the last few months, SunPower defaulted on a few debt payments, which made investors nervous. But the company secured waivers from debtholders and has successfully raised capital, providing the company with short-term liquidity.
Notably, SunPower also agreed to issue penny warrants to Sol Holding in connection with the second credit agreement. Here, Sol Holding can purchase 41.8 million shares of SunPower with an additional 33.4 million warrants if the second-term loan is drawn. The deal will dilute existing shareholders significantly, as the warrants can be exercised for $0.01.
How Did SunPower Stock Perform In Q4 of 2023?
SunPower also released its Q4 results last week. The clean energy company reported revenue of $356.9 million and a net loss of $123.9 million, or $0.51 per share on an adjusted basis. The per-share loss was wider than expected, and revenue also fell short of estimates.
During the quarter, SunPower added 16,000 new customers in Q4 and ended the year with a backlog of 52,100 homes. Its retrofit backlog stood at 15,100, while new homes backlog was higher at 37,000. The company emphasized it began to see improvement in new sales bookings in September, even though net bookings were down 24% year-over-year in terms of sales.
Similar to other companies, SunPower is focused on lowering its cost base amid higher interest rates and inflation. It has already executed on reducing operating expenses and cost of goods sold by $100 million, as SunPower expects two-thirds of these savings to recur annually. According to management, new relationships with key suppliers in 2024 and lower cost of equipment should help improve profit margins. As it diversifies the supply chain, SunPower expects to provide value to consumers.
On the Q4 earnings call, CEO Peter Faricy explained, “We expect to realize as much as a 37% decline in overall equipment expense from lower cost panels, inverters, and racking systems… We are pleased to be able to achieve material cost savings without having to sacrifice quality. Using panels as an example, you can see that premium manufacturers are converging on panel efficiency.”
SunPower ended 2023 with $87.4 million in cash and $350 million in debt. It expects net losses to range between $80 million and $160 million in 2024, and is optimistic about reporting a positive free cash flow in the second half of the year.
What Is the Target Price for SPWR Stock?
Despite its efforts to lower costs, SPWR will remain unprofitable in the near term. Analysts expect the company to narrow its loss per share from $0.91 in 2023 to $0.04 in 2025.
Out of the 25 analysts covering SunPower stock, one recommends “strong buy,” 15 recommend “hold,” two recommend “moderate sell,” and seven recommend “strong sell,” for an average opinion of “hold.” The mean target price for SPWR is $4.51, indicating an upside potential of almost 37%.
