SunPower Corp, maker of photovoltaic solar panels, posted a higher-than-expected quarterly profit Thursday, but worries about European subsidies and a disappointing forecast for the current quarter knocked its shares lower.
Solar power developers remain dependent on government subsidies and likely cuts in the hot Spanish market, as well as delays in renewing the US tax credits, has weighed down stocks across the sector.
Chief Executive Officer Tom Werner told a conference call that, if the Spanish government pushes through planned cuts, SunPower's reach across the utility and residential markets would keep it on track through next year.
"We have confidence that our model for 2009 can sustain market disruption in Spanish power plant market, as well as a delay in the extension of the United States investment tax credit," Werner told a conference call.
SunPower shares fell $4.83, or 6%, to close at $75.32 on the Nasdaq. The shares have fallen 42% since the end of 2007, when they were one of the hottest stocks in the market.
Solar companies are rapidly ramping up output of photovoltaic cells, which turn sunlight into electricity, to take advantage of the growing appetite for clean energy around the globe.
Tight supplies of silicon, which is used in the majority of cells, have crimped growth in the industry, but SunPower said its costs for the key material fell about 10% in the second quarter, helping to boost its margins.
SunPower, the North American market leader and second- largest US solar maker by market value, said it had a second-quarter net profit of $28.6m, or 34 cents per share, compared with a loss of $5.3m, or 7 cents per share, in the-year ago period.
Excluding charges and stock-based compensation, earnings rose to $67.6m, or 61 cents per share, easily beating analysts' forecast for 51 cents per share, according to Reuters Estimates.
Revenue surged more than 120% from a year earlier to $382.8m, topping analysts' expectation of $345m.
CYPRESS DISTRIBUTION
Al Kaschalk, an analyst at Wedbush Morgan, said news Cypress Semiconductor Corp would spin off its stake in SunPower and distribute the 44m shares it owns also pressured the stock price, although he said the impact would be temporary.
"There is no dilution impact, it just goes into uncertainty as to whose hands those shares will end up in and how that will be handled," said Kaschalk.
Investors were disappointed that SunPower forecast third- quarter earnings, excluding charges and stock options, would decline from the second quarter level to between 53 cents and 57 cents per share and revenue to $340m to $355m.
But for the second time in three months, the San Jose, California-based company raised its profit forecast for the full-year, to between $2.26 and $2.36 per share from $2.10 to $2.20. SunPower now expected revenue of $1.39bn to $1.44bn, up from the $1.3bn to $1.375bn it forecast in April.
SPANISH SUN SETTING?
The government of Spain, the industry's hottest market, will ask the energy regulator to cap its solar subsidy to 300 megawatts from the current 1,200 MW cap under rules that expire in September and grant solar power generators 71.3 cents (0.45 euros) per kilowatt hour.
Still, analysts said that, with worldwide demand for solar power buoyant, companies should not have difficulty selling out their production.
"The story that's affecting the entire sector right now is concerns about the Spanish market," said Rob Stone, an analyst with Cowen and Co in Boston.
"We continue to believe that the market is overly focused on the impact of Spain ... there's pent-up demand in other places where there are customers that will buy those modules," he added.
By Matt Daily, Reuters.
