shares The power of the sun (NASDAQ: SPWR) It was down 15.8% in early trading on Friday. The company, which makes and sells solar electric products, closed Thursday at $19.02 and opened Friday at $18.11, dropping to $15.94 in the morning, its lowest in 52 weeks. The stock had a 52-week high of $57.52 set last January. The stock is down more than 65% over the past year.
SunPower released its preliminary fourth-quarter earnings after the market closed on Thursday and investors were disappointed.
One concern in the report was that SunPower was replacing third-party connectors at its retail value-added Lightweight and Commercial and Industrial Solutions Systems (CIS) distributor because the company said it found a cracking problem in the connectors. SunPower said replacing these connectors would cost it approximately $27 million in the fourth quarter and another $4 million in the first quarter of 2002, although it said it plans to pursue cost recovery from suppliers of defective connectors.
The company also said it expects fourth-quarter adjusted earnings before interest, tax, depreciation and amortization (EBITDA) to be at the bottom line of previous SunPower guidance of $18 million to $41 million.
The mix of bad news, combined with the market’s trend for a third consecutive day, was enough to send SunPower shares tumbling.
It’s important to note that SunPower, while it’s going through some difficulties, is on track for its third consecutive year of revenue growth. In nine months, the company reported $923.3 million in revenue and even if it used the company’s bottom line of $361 million in revenue for the fourth quarter, that equates to $1.28 billion this year, compared to $1.12 billion last year. It is worrying, however, that the company will likely generate negative earnings per share this year. In nine months, it posted a loss of $0.33 per share.
Over the long term, SunPower still looks like a good bet due to market trends and because it saw a 33% increase in the number of residential homes to 53.3 million in the quarter. The company is selling its business in the CIS to focus on its growing residential business. This sale, if it occurs, should help balance the books of the company and increase its profit margin.
Another thing to watch is if the Build Back Better plan is passed in Congress, which would be a boon to renewable energy stocks in general because the bill would increase and expand the federal investment tax credit for solar energy by 26% to 30%. For at least 10 years.
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