SunPower: Collins Stewart Says Sell On Premium To ‘B’ Shares
Shares of SunPower (SPWRA) are down 32 cents, or 1.4%, at $22.42 after Collins Stewart analyst Dan Ries today cut his rating on the shares to Sell from Neutral, writing that the stock trades at an unreasonable premium of 35% relative to the “B” shares of SunPower (SPWRB), which this morning fetch $16.48, lower by 40 cents, or 2.4%.
That premium, Ries notes, has expanded from 19% back on July 8th.
SunPower has two classes of shares as a result of the fact that the B shares were originally owned by Cypress Semiconductor (CY) and we’re distributed to its shareholders in September of 2008.
Ries thinks the closing of the tender offer by energy giant Total (TOT) in mid-June, which reduced the float in the A shares by 60%, is the primary culprit in pushing up the stock. With Total having said it will collapse the two share classes into one, Ries thinks the premium between A and B has to narrow, and he recommends investors consider the B shares if they’re going to buy any SunPower stock. He figures the B shares are worth $15.
Thanks to continue module price declines in the solar energy technology market, Ries now sees SunPower making more money and less profit. he raised his revenue outlook to $2.8 billion for this year, from a prior $2.7 billion, while cutting his EPS estimate (on a GAAP basis) to 21 cents per share from a prior 71 cents. Of that cut, 17 cents is related to a one-time charge in Q2 for Italian solar energy tarrif adjustments, and to the total tender. Compared to the Street’s non-GAAP estimate of $1.36, Ries models $1.24.
Ries cut his 2012 outlook to $3.1 billion in revenue and 52 cents EPS, down from $3.1 billion and 92 cents. blogs.barrons.com
my comment: I'm considering a paired trade: long SPWRB and short SPWRA. Or maybe just a plain short of SPWRA. I'm wondering what I'm missing in this story, because it doesn't sound right. |
