Thesis
2010 has continued the significant growth of the solar market throughout the country with new markets in China and the USA advancing their demand for solar panels. Yet, among all these risks, a handful of companies have established 
themselves as market leaders through their ability to either produce highly efficient panels and/or produce panels very inexpensively. The industry has become a commodities industry with those that can produce the most efficient, least expensive panels being the leaders.
SunPower Corp. (SPWRA), based in Silicon Valley, has established itself in this competitive industry through its profound solar efficiency. The company is the leader in efficiency for solar panels on the major market, but they have struggled as of late because SunPower has lost out to a number of companies that have been able to much more cheaply produce solar panels. Yet, the company still has significant growth potential with the rest of the solar industry, and even as Sunpower is not the market leader, it still has built a small economic moat by building the most efficient silicon-powered solar cells.
The company has had issues as of late because of negative free cash flow, inconsistent ability to produce free cash flow, and an inconsistent pipeline. The outlook, however, for the solar sector has gotten better in 2010 and moving into the future. California and China have become new markets that will help to battle the loss of feed-in tariffs and loss of demand in Europe. If the company can begin to maintain consistent free cash flow and a consistent pipeline of demand, they should be able to
move into a market leader with the technology to produce PV cells with 20%+ efficiency while the market average is only 14-15%.
The company is able to produce solar cells with efficiency at 20%+. The majority of cells only have an efficiency at 15%. This is the edge that makes SunPower attractive to me. While some companies and projects will obviously want a cheaper panel, the efficiency to price of SunPower is attractive. In just the last five months, Sunpower has taken on a number of new projects: three power plants in Italy are being powered by the new Seregenti line, a PV power park in Italy, power plant projects Delaware, and compeleted a solar power plant in Shelby, NC for Duke Energy. The SunPower line is very vibrant and continues to grow. The company, additionally, has launched the…
