Friday, October 17, 2008

Sunpower: Downgraded at Citi and Merrill Lynch; Goldman Lowers Target (SPWRA)

From Notable Calls:
Sunpower (NASDAQ:SPWRA) has some nasty comments from several tier-1 firms:

- Citigroup notes that following through on their call into what they thought would be the last good Q before big risk develops, they are downgrading SPWRA from Hold to Sell taking advantage of ~25% move post-earnings. The Street is already negative on this sector (firm highlighted ’09 supply shock back in May ’08), but this is a 100% stock-specific call. The bottom line here is that they think a big miss is coming in CQ1 as classic signs of inventory risk are developing in its components biz, while CQ4 should represent a multi-year peak in its margin structure. With respect to liquidity, it has access to cheap money through a term-loan but will continue to skate on thin ice as it looks unlikely to generate FCF through C2010. Risks to the call include potential for SPWRA to self-finance projects very near-term, which could mute some channel risk (albeit w/other ramifications). F09 (GAAP) from $2.29 to $1.92, F10 from $3.06 to $2.60. Target $55 to $30 on lower multiple on GAAP EPS.

- Merrill Lynch downgrades the stock to Neutral from Buy and are lowering their PO to $55 from $95, primarily on demand concerns in the U.S. residential solar market....MORE