Steady Demand Growth Could Drive SunPower Stock To $30

Up around 7x from its low in March 2020, at the current price of $23 per share, we believe SunPower stock (NASDAQ: SPWR) has further upside potential. SunPower stock has risen from $3 to $23 off its March 2020 low, significantly more than the S&P which increased by over 80% from its lows. Further, the stock is up around 3.5x from the level it was at before the pandemic. However, we believe that SunPower stock could rise around 30% to $30, driven by expectations of continuing demand growth and strong Q1 2021 results. Our dashboard What Factors Drove 614% Change In SunPower Stock Between 2018 And Now? has the underlying numbers behind our thinking.

SPWR stock’s rise since late 2018 came despite an 7% drop in revenues from $1.2 billion in FY 2018 to $1.13 billion in FY 2020. Combined with a 20% rise in the outstanding share count, RPS (revenue-per-share) dropped 22% from $8.54 to $6.63 over this period.

However, SunPower’s P/S (price-to-sales) multiple rose from 0.4x in 2018 to 3.9x by 2020 end, but has since dropped to 3.5x. We believe that the company’s P/S ratio has the potential to rise further in the near term on expectations of continuing demand growth and a favorable shareholder return policy, thus driving the stock price higher.

Where Is The Stock Headed?

The global spread of Coronavirus and the resulting lockdowns hampered demand for solar modules and systems. However, demand has since recovered and this has clearly benefited demand for SunPower’s solar power systems and components. This is evident from the company’s Q1 2021 earnings, where revenue came in higher at $306 million from $285 million for the same period last year. A drop in cost of sales and operating expenses saw operating loss drop to $3 million from $21 million. However, a $94 million drop in other income weighed on net income, and EPS dropped to -$0.28 from -$0.01.

With the lockdowns being lifted and the continued growth in demand for solar modules and systems, we believe the company’s revenues stand to benefit further in the medium term. Additionally, if the company is able to continue controlling operating expenses going forward, a rise in investor expectations could drive up the company’s P/E multiple. We believe that SunPower stock can rise 30% from current levels to around $30.

While SunPower stock may move higher, it is helpful to know how its peers stack up. SunPower Stock Comparison With Peers summarizes how SunPower compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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