In a June 19 research note, analyst Pavel Molchanov reported that Raymond James downgraded its recommendation on SunPower Corp. (SPWR:NASDAQ) to Market Perform from Outperform following the stock's year-to-date 104% jump. The previous target price was $9 per share, and the share price currently is around $10.34. Raymond James does not have a current target price on SunPower.
Also noteworthy is that, looking forward, SunPower will likely face some macroeconomic tailwinds, Molchanov highlighted. They include the upcoming incremental decrease in the federal Investment Tax Credit (ITC) that will likely cause demand pullback as it plays out, affecting distributed, or commercial and residential, deployments the most. Starting in 2020, the ITC will drop from 30% to 10% for commercial and to 0% for residential.
There also is the probability of renewed price pressure on photovoltaic (PV) modules, Molchanov pointed out, as Chinese competitors continue to capture market share and the Section 201 tariff phases out, from 25% today to 20% in 2020, 15% in 2021 and zero subsequently. The latter will diminish the pricing advantage that SunPower and other tariff-exempt companies had.
However, SunPower "has a solid position due to its status as an integrated player, including leverage to distributed PV and battery storage, both being themes that we like," Molchanov noted. It also has the "added bankability advantage of having the energy giant Total as a 'big brother.'"
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Disclosures from Raymond James, SunPower Corp., June 19, 2019
ANALYST INFORMATION
Analysts Holdings and Compensation: Equity analysts and their staffs at Raymond James are compensated based on a salary and bonus system. Several factors enter into the bonus determination, including quality and performance of research product, the analyst's success in rating stocks versus an industry index, and support effectiveness to trading and the retail and institutional sales forces. Other factors may include but are not limited to: overall ratings from internal (other than investment banking) or external parties and the general productivity and revenue generated in covered stocks.
The analyst Pavel Molchanov, primarily responsible for the preparation of this research report, attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers and (2) that no part of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views in this research report. In addition, said analyst(s) has not received compensation from any subject company in the last 12 months.
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Raymond James & Associates, Inc. makes a market in the shares of SunPower Corporation, Enphase Energy, Inc. and TPI Composites, Inc.
Raymond James & Associates or one of its affiliates owns more than 1% of the outstanding shares of TPI Composites, Inc.
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