Friday, January 25, 2008

Lazard's Defense of SunPower (LAZ; SPWR)

This is probably a good place to mention some of the thinking behind this blog.
Although one of the foci of the blog is alternative/renewable energy, it is not exclusive of the wider world.
To paraphrase Chairman Mao, "The markets are the sea in which cleantech/greentech swims". Everything is connected and being able to make the connections is one of the talents/skills/gifts that capitalism rewards, sometimes handsomely.

So when depositors started queuing up at Northern Rock, we posted quite a few links. It was a spectacle- a run on a bank in 2007!?- and a portent. It's the same with the monoline insurers. So three of our last five posts had ABK in the headline.
That the managers of what should be a sleepy little backwater thought they were gunslingers is a heck of a story. It is also important to the cost of money, which is one of the transmission mechanisms of the zeitgeist. If Vestas (to pick an example out of the air, so to speak) has to pay more to rent money it changes the expected rates of return.
Plus, the numbers are getting really big, which has always fascinated me.
Now, on with the show.
From 24/7 Wall Street:

SunPower (NASDAQ: SPWR) posted a lackluster guidance after earnings this morning and this originally had most of the other key solar stocks trading much lower. Most of these recovered handily in the morning and even SunPower recovered quite a bit off of lows.

Analyst Sanjay Shrestha of Lazard Capital Markets issued a note today whereby he called the weakness a buying opportunity and he is reiterating his BUY rating and has a price target of $185.00. That is well over a 100% move from today's prices if that were to come true.

  • Shrestha says, "...we note that the company tends to be conservative with its initial guidance, and the Systems business' numbers are lumpy on a quarterly basis... The current price (19x 2009E EPS of $3.35) represents a compelling entry point, in our view. Even a 20x multiple on 2010E EPS of $5.35, discounting back at 15%, would equate to a $95-$100 share price, well above the current level.... Our $185 price target reflects a 40x (a premium to the solar group's 2009E multiple of 20x) multiple on our 2010E EPS of $5.35, discounted at 15% for one year."...