Last week, you might have seen that SunPower Corporation (NASDAQ:SPWR) released its quarterly result to the market. The early response was not positive, with shares down 5.4% to US$8.82 in the past week. Revenues of US$492m beat expectations by a respectable 3.4%, although losses per share increased. SunPower lost US$0.11, which was -59% greater than what analysts thought would happen. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
After the latest results, the seven analysts covering SunPower are now predicting revenues of US$2.3b in 2020. If met, this would reflect a sizeable 33% improvement in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$0.30 per share. Before this earnings announcement, analysts had been forecasting revenues of US$2.3b and losses of US$0.50 per share in 2020. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the sizeable expansion in earnings per share expectations following these results.
Even with the lower forecast losses, analysts lowered their valuations, with the average price target falling 5.8% to US$10.60. It looks like analysts have become less optimistic about the overall business. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. There are some variant perceptions on SunPower, with the most bullish analyst valuing it at US$14.50 and the most bearish at US$4.50 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One thing stands out from these estimates, which is that analysts are forecasting SunPower to grow faster in the future than it has in the past, with revenues expected to grow 33%. If achieved, this would be a much better result than the 8.3% annual decline over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 7.8% next year. Although SunPower’s revenues are expected to improve, it seems that analysts are also expecting it to grow faster than the wider market.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – and our data does suggest that SunPower’s revenues are expected to grow faster than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple SunPower analysts – going out to 2021, and you can see them free on our platform here.
You can also view our analysis of SunPower’s balance sheet, and whether we think SunPower is carrying too much debt, for free on our platform here.
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