SunPower Corporation (SPWRA) is increasing its exposure in the growing U.S. solar market, where it generated 32% of its sales in the first nine months of 2010. In line with its U.S. focus, the company is planning to open a new office in the metropolitan area of Austin, Texas. For this purpose, the company received a $2.5 million investment from the Texas Enterprise Fund.
The Texas Enterprise Fund is a business incentive fund that was created by legislation in 2003. The fund is used for ensuring the growth of business in Texas by attracting new business to the state or to assist the substantial expansion of an existing business. SunPower plans to create 450 jobs in Texas over the next four years with the help of this investment.
SunPower believes the new office in Texas will boost the demand for its solar products in the U.S. The spotlight of solar companies in the U.S. is increasing day by day. In October 2010, Chinese solar panel maker Suntech Power Holdings Company Ltd. (STP) opened its first U.S. manufacturing plant in Goodyear, Arizona. The company expects demand for solar products in the U.S. and Canada to exceed 1 GW in 2010.
SunPower’s customer base is spread across North America, Europe, the Middle East, Asia and Australia. The company is proactive in entering new markets. Apart from a sizeable presence in the US, it is already focusing on improving market share in Spain and Germany, while gaining new market share in emerging markets like Italy, Australia, France, Japan and Greece.
SunPower is also increasing its global market presence within the residential and commercial markets by expanding its network of dealers. By fiscal-end 2011 the company expects its global dealer network to almost double to around 2,000 dealers. Finally, by steering clear of long-term contracts for sales through its dealer network, the company is geared for growth in its margins through any short-term upswing in the solar market.
SunPower Corporation designs, develops, manufactures, markets and sells high-performance solar electric power technology products, systems and services worldwide for residential, commercial and utility-scale power plant customers. The company’s semiconductor-based solar cells and solar panels, which convert sunlight into electricity, are manufactured using proprietary processes and technologies.
The company currently is trading at a premium compared to its peers in terms of forward earnings estimates. Thus in the near term, we believe its Zacks #1 Rank (Strong Buy) peers like JinkoSolar Holding Co. Ltd. (JKS), and ReneSola Ltd. (SOL) are more promising compared to the Zacks #3 Rank (Hold) SunPower stock.
Over the longer-term however, we are bullish on SunPower with an Outperform recommendation, given its diversified channel strategy with a strong presence in the residential and commercial market, along with its status as a conversion efficiency leader. The company also has a steadfast focus on spreading out its revenue stream by climbing the solar value chain. Going forward the company will reap the benefit of its low cost manufacturing base, which should improve further with the completion of its Malaysian JV.
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