SunPower Announces Initial Public Offering SPWR Message Board

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Gold/Mining/Energy : SunPower Announces Initial Public Offering SPWR

SPWR 1.660

-5.4%

1:11 PM EST

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To: Dennis Roth who wrote (61)	4/21/2008 8:52:30 AM
From: Dennis Roth	Read Replies (1) of 196

SunPower Corp. (SPWR): We see SunPower performing well in 2008; maintain Buy rating - Goldman Sachs - April 21, 2008 What's changed Key takeaways from SunPower’s 1Q08 report: (1) EPS of $0.15/$0.39 for GAAP/non-GAAP was in-line to our $0.15 GAAP estimate and above our $0.35 non-GAAP estimate. (2) Guidance of $2.10-$2.20 (non-GAAP) for 2008 was higher than consensus of $2.07 and better than our forecast of $2.04. (3) Management stated that they are tracking well on their goal to a 50% reduction in costs to the end user over 5 years. However, given the limited disclosure it is hard to quantify what “well” means in our view. Implications We continue to see firm industry pricing for 2008 and therefore believe that industry fundamentals will be strong as solar companies sell more megawatts and drive costs lower. While SunPower’s financial model is a bit of a black box given the limited disclosure on megawatts sold, ASPs or cost per watt, we continue to like the shares as we anticipate them driving strong results in a robust solar market. We maintain our Buy rating. We are updating our FY08-10 GAAP estimates to $1.21, $2.20, $2.92 from $1.22, $1.91, $2.72 in order to update for the latest reported quarter’s information and guidance. Our numbers are not massively different than before and just reflect a slightly more positive view on 2009 than before. Valuation We are keeping our 6-month target price at $105 given that we believe the market will continue to reward solar companies with high valuations as long as earnings are trending strongly upwards (which we expect to continue for at least the next 6 months). Our primary valuation metric is a PEG multiple, while also taking into account DCF analysis and P/E sensitivity analysis on forecast out-year earnings. Key risks (1) Industry over-supply, (2) Cost/watt trend is somewhat challenging to evaluate, (3) Other technologies could win in certain end markets.

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