Should I Buy SunPower Corporation (SPWR)? Finance YouTuber Analysis

The YouTuber is holding SunPower, anticipating a recovery in the residential solar market within the next few years driven by increasing utility rates and decreasing component costs. He acknowledges the current challenges posed by high interest rates but sees long-term potential.

“This is not an area that I'm putting new money in right now but I'm not selling my solar stocks because I do think there is going to be a recovery coming over the next couple of years.”

The analyst suggests avoiding SunPower despite its recent financing, as the terms of the loans are highly dilutive to existing shareholders. While the company might avoid bankruptcy in the short term, the significant equity given up to secure the debt means public market investors will see limited upside even if the company recovers and thrives. The financing terms indicate severe financial distress and a lack of leverage for SunPower.

“I look at this and I see sunpow basically having to beg their sponsors for financing and those sponsors really squeezing everything that they absolutely could out of this so this is going to be extremely dilutive and this is the reason that the stock went from being up over 20% at the start of trading on Thursday to actually down later in the day”

The analyst suggests that SunPower, a residential solar installer, is poised for a rebound in 2024. Despite headwinds in 2023 due to higher interest rates and changes in net energy metering, there are 'green shoots' appearing, such as increased bookings in California, Texas, and Florida. Additionally, falling interest rates are expected to reduce borrowing costs for installers, improving their margins.

“if you're interested in this industry I think that's where I would be looking first”

The analyst believes SunPower is well-positioned for a rebound in 2024, citing its lower financial risk compared to competitors like Sunrun due to its sales model (cash/loans vs. leases). He notes the current $750 million market cap and $4 share price represent a good valuation, especially with potential tailwinds like rising utility rates, increasing attach rates for energy storage, and lower component prices expected to improve margins and profitability after a challenging 2023.

“I like that valuation and I think this will be a much more valuable company Long Term whether they're selling projects or whether they financing them themselves.”

The YouTuber suggests dollar-cost averaging into SunPower, noting that despite recent declines due to rising interest rates impacting residential solar financing, the long-term outlook is solid. He believes the company, as a leading player in the industry, will adjust pricing and benefit from increasing electricity costs and growing solar adoption.

“I think the future is solid maybe time to start dollar cost averaging into some of these stocks or a basket of these stocks”

The YouTuber continues to hold SunPower shares as a long-term investment despite recent underperformance and challenging market conditions for residential solar. He acknowledges the current headwinds like higher interest rates and labor costs impacting demand, but believes in the long-term tailwinds for the industry, such as rising electricity costs and increased energy storage adoption, particularly in California.

“I continue to hold shares and don't plan on selling them anytime soon. This is a long-term investment for me but definitely an underperformer in 2023.”

The YouTuber recommends SunPower, highlighting its transformation into a residential solar company that provides technology and design services to third-party installers, reducing its own financial risk. The company shows increasing backlog, expects significant growth in new customers and revenue, and has substantially reduced its net debt. Its valuation is considered reasonable given its target adjusted EBITDA per installation and the strong tailwinds in residential solar.

“a lot of Tailwinds behind residential solar and I think sun power given its structure the fact that it's not taking a lot of the Financial Risk on its own balance sheet that's the reason that this is the stock that I think investors should be looking at most closely”

The YouTuber suggests that solar installers like SunPower are better positioned to benefit from the new tax credits, as the credits are designed to incentivize installations, particularly smaller projects. He notes that these companies did not see a market reaction, implying an undervalued opportunity given their direct benefit from the new rules, which will make solar more economical for consumers and increase demand for installers.

“I actually think installers look a lot better today than they did just yesterday.”

Hoium is bullish on SunPower, highlighting its strategic shift to a technology-focused residential solar company after spinning off manufacturing. He praises its business model of partnering with financing companies to offload risk and points to strong adjusted EBITDA growth and a healthy cash balance as indicators of its improved strategic position.

“I think they're in a much better strategic position today than they have been in a really long time.”

The YouTuber suggests SunPower as another leader in residential solar, offering similar financing options to Sunrun but also providing cash or loan sales. This flexibility in sales models makes it an attractive option in the residential solar sector.

“SunPower offers similar financing but they also sell on a cash or loan basis and then asset ownership can be a really attractive too.”

The analyst notes that SunPower is in a stronger financial position than Sunrun with less debt and is expected to return to profitability next year. However, its sales growth of 6% this year and 5.7% next year is not impressive enough to justify a strong 'buy' recommendation, suggesting it's a better option than Sunrun but not a high-conviction growth play.

“much better buy much better much better investment than shares of Sunrun there just on these valuations and on this balance sheet Health”