SunPower Corp. (SPWR) has reported preliminary results for the fourth quarter of 2021. Further, the company revealed that it is taking remedial measures to resolve cracking issue found in certain factory-installed connectors. SunPower sells, installs, and finances solar power products.
For the fourth quarter of 2021, Revenues are expected to remain within the previously guided range of $361 to $421 million. Adjusted EBITDA is expected to be at the low end of SunPower’s previously disclosed guidance range of $18 to $41 million.
The company said that factors affecting its fourth quarter adjusted EBITDA include $6.5 million of Residential EBITDA effectively pushed into 2022 as the result of weather in California and COVID impacts. Also, $3 million invested in sales and marketing is expected to expand SunPower’s reach.
The company is scheduled to report upcoming earnings on February 16, 2022.
Issue in Connectors
Meanwhile, the company said that to enhance customer care experience, it was replacing certain third-party connectors within its Light Commercial Value-Added Reseller (CVAR) and Commercial & Industrial Solutions (CIS) systems.
During a product quality assessment, the company found a cracking issue in certain factory-installed connectors within third-party commercial equipment supplied to SunPower. No safety incident or degradation of performance has been reported due to the issue, the company said.
SunPower is planning to replace all of these connectors to avoid potential longer-term complications. Based on SunPower’s testing, the company expects systems to continue to operate safely while awaiting replacement.
SunPower expects about $27 million of supplier-quality related charges in the fourth quarter of 2021 and another $4 million in the first quarter of 2022, as it seeks recovery of costs from suppliers. The charges are expected to be funded with cash in hand.
The CEO of SunPower, Peter Faricy, said, “We plan to fundamentally change how consumers engage with energy by providing the highest quality products and services available. This includes ensuring our customers are taken care of before potential problems arise. With high-growth opportunities spanning our existing and evolving markets, customers can count on us for transparency and the right tools to power the world with solar.”
Recently, Morgan Stanley analyst Stephen Byrd upgraded the rating on SunPower to Hold from Sell and lowered the price target to $23 from $27. The new price target implies 20.9% upside potential from current levels.
Byrd said, “Several concerns have lowered the outlook for 2022, including challenges in its commercial & industrial business, investor concerns of a potential residential slowdown in CA with net metering rules under review (50% of SPWR’s business), and supply chain challenges lowering profitability.”
“We are also optimistic that a positive revision to the proposed net metering changes could be introduced in 1H22, we remain constructive on the broader outlook for rooftop solar in the US, and the company is selling the challenged C&I business,” the analyst added.
Based on 3 Buys, 5 Holds and 5 Sells, the stock has a Hold consensus rating. The SunPower stock price prediction of $25.73 implies 35.3% upside potential from current levels. Shares have declined 59.7% over the past year.
According to TipRanks data, financial blogger opinions are 75% Bullish on SPWR, compared to solar stocks’ sector average of 71%.
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