Interest charge

SunPower shares fall on forecast, priced from parts replacement

By Michel Dabaie

Shares of SunPower Corp. fell 15% to $16.09 in afternoon trading after the company announced it would support third-party connector replacement in its trading business.

The company also said adjusted earnings before interest, taxes, depreciation and amortization are expected to be at the lower end of fourth-quarter guidance.

The solar technology and energy services provider said it was replacing some third-party connectors in its VAR systems for small businesses and commercial and industrial solutions.

The company said it has identified a cracking issue in some factory-installed connectors in third-party commercial equipment.

No security incidents or performance degradation have been reported, but the company said it is proactively replacing all of these connectors, mostly in 2022.

SunPower said it expects about $27 million in supplier quality charges in the fourth quarter of 2021 and about $4 million in the first quarter of 2022 as it continues cost recovery from suppliers. . The company said it expects the fee to be funded with cash on hand.

“‘Recall’ headlines are generally difficult to interpret as positive, although SPWR appears to be appropriately taking proactive steps in this instance,” Truist Securities said in an analyst note.

Truist analysts said that “ultimately, it does not appear that these product quality issues extend to the residential sector, and as such, we see modest to no reputational risk that this event poses for the supply of basic residential products”.

SunPower said it expects fourth-quarter revenue to be within the previously guided range of $361 million to $421 million. The FactSet consensus is $373.9 million.

Excluding the charge, the company sees fourth-quarter adjusted EBITDA in the low end of the $18 million to $41 million range.

The company pointed to approximately $6.5 million of residential EBITDA actually pushed through 2022 due to California weather and the effects of Covid. An additional $3 million has been invested in sales and marketing to rapidly expand SunPower’s usable solar market to more customers in under-penetrated areas nationwide, the company said.

SunPower is continuing to sell its Commercial & Industrial Solutions business to focus on its residential business. SunPower said it remains in advanced discussions for the sale of CIS and expects to finalize an agreement within weeks.

“Encouragingly, resistive solar demand was slightly above our expectations while storage bookings ended the year significantly above the company’s target,” JP Morgan said in an analyst note. .

JP Morgan said it maintained its underweight rating primarily based on relative valuation. “We are looking for more visibility to support our EBITDA growth expectations. Our underweight rating is not a call to sell the stock,” JP Morgan said.

Write to Michael Dabaie at [email protected]