Analysts slam SunPower after unexpected 1Q loss

Shares of San Jose, Calif.-based SunPower (Nasdaq: SPWR) were down a little more than 2 percent to $25.41 at the close of trading today after the company reported unexpected losses in the first quarter.

SunPower recorded a net loss of $4.79 million, or $0.06 per share, as revenue slid 22 percent to $213.8 million from the previous quarter. Adjusted profit excluding one-time charges was $0.05 per share.

And SunPower cut its projections for 2009 for the third time, now forecasting revenue of $1.3 billion to $1.7 billion for the year, with earnings of $1.25 to $1.75 per share.

"The first quarter of 2009 was the most challenging quarter we've seen since SunPower went public in 2005," CEO Tom Werner said in a release about the first quarter report. 

Werner said the credit crunch and the weak economy stifled sales. Additionally, inclement weather was a factor, slowing installations because of snow in Germany and rain in California in February.

The current 2009 estimates rely heavily on a significant ramp in the residential business in the second half of the year—a risky move considering the "volatile nature of the residential business," according to Jeff Osborne, an analyst with Thomas Weisel Partners.

SunPower first cut its 2009 projections in November, blaming the company's decision to switch its currency to the euro, which later depreciated against the dollar (see Dollar's strength hurts SunPower). At that point, SunPower said it planned to record 2009 total revenue of $2 billion to $2.1 billion and non-GAAP diluted net income per share of at least $3.

Since then, the market for solar panels has slowed, leaving companies with extra inventory as orders are delayed or canceled (see Extra solar panels in Spain driving down prices). In March, SunPower cut its 2009 forecast a second time, predicting adjusted profit of $2.20 to $2.80 per share and revenue of $1.6 billion to $1.8 billion.

Solar companies are predicting the market will pick back up the second half of 2009 (see Order delays lead to layoffs at Oerlikon Solar).

Still, analysts say any short-term recovery at SunPower could come at the expense of margins.

"SunPower's high inventory this quarter is alarming," Osborne said. "Management is confident they will be able to work through that inventory in the next quarter, [but] we believe it will be difficult given our current outlook. ... The near-term environment is challenging."

The losses at SunPower took many analysts by surprise, so this morning brought a flurry of downgrades that led to a nearly 7 percent drop in the share price in pre-market trading today. Wall Street had predicted a profit of $0.24 per share and revenue of $269 million, according to Thomson Reuters.

Thomas Weisel held a market-weight rating on the stock and a $25 price target, but lowered its 2009 revenue estimate from $1.58 billion to $1.46 billion.

Jeffries cut its target price from $40 to $34, while Brigantine dropped the target from $36 to $34. Merriman Curhan Ford downgraded the shares from neutral to sell.

Shares of SunPower have ranged from $18.50 to $107 in the past 52 weeks.

SunPower is conserving cash by cutting capital spending to between $250 million and $350 million—down from $350 million to $400 million. It hasn't started production on its final two lines at its Fab 2 because of weak demand. Additionally, the company has delayed the build-out of its Malaysian plant to conserve capital (see Good week for auto technology).

"We have responded to current market conditions by moving to a demand-driven manufacturing model and reducing our planned operating expenses to align with our adjusted revenue outlook," Werner said.

SunPower expects to produce 400 megawatts of solar cells and panels in 2009.

SunPower, the leading maker of crystalline silicon solar panels in America, was a subsidiary of Cypress Semiconductor (NYSE: CY) before spinning off in September 2008.