I’m not entirely sure when this ad was sent out, or exactly what the context was, but I was sent a snippet of it from a reader just recently and thought I’d share.
The ad is for Blue Chip Growth, Louis Navellier’s large cap growth newsletter (according to Hulbert’s calculations, this newsletter has handily beaten the market over the past 3, 5 and ten year periods, though it’s worth noting that it usually carries a very large number of individual stocks in its portfolio … so individual subscribers might not match those returns).
Here’s the little snippet that was sent to me:
“An interesting thing happened to my current solar stock recommendation. Even though the company’s profits rose more than 11-fold to 15 cents per share, analysts still weren’t happy. They expected earnings of 35 cents per share! Are you kidding me? Honestly, if Wall Street had been a bit more realistic about what we can all expect, then on Thursday they would have been celebrating this company’s success, instead the stock took a small hit to its ego. I think it’s only a matter of time before Wall Street comes to its senses and realizes that when a company not only reports that its first-quarter revenue increased 92%, as well as raises its second-quarter and full-year guidance, then that stock’s on fire. Check out my Blue Chip Growth newsletter to get the name and full buy advice on this solar stock!”
So … not exactly a bucket full of clues, but, the Sun God be praised, the Thinkolator is on the case … this stock pretty well has to be …
Remember when this company seemed like kind of a flaky side project investment for T.J. Rodgers, CEO and founder of Cypress Semiconductor? i guess that ages me a bit, SunPower has been the engine behind Cypress’ stock for several years, and Cypress still owns more than half of the shares (which is reflected in the market caps — CY has a market cap of about $4 billion, SPWR about $7 billion. Almost all of CY’s market cap can be explained by it’s ~52% stake in SPWR).
As with many solar stocks, SPWR is right in the middle of a sort of inflection point on earnings — we’re now at the point where solar stocks are expected to be profitable, and possibly even reasonably valued as solar energy comes closer to parity (thanks to subsidies) with the electric grid, and big government incentives continue to increase demand for “green” energy and spur installation growth. That is reflected in the fact that SPWR has a trailing PE well into the 300s, but a forward PE of only 26.
SPWR did report 15 cents a share of earnings just last week, which was lower than some analyst estimates (though the average estimate I saw was not quite so dramatic as Navellier’s tease indicates), and they did grow revenues by 92% last quarter. The outlook was somewhat conservative, which is probably why the shares tailed off a bit after the announcement, but it also could have certainly just been profit taking — the shares had almost doubled in the previous month. Navellier’s recommendations are quantitatively derived, with a big emphasis on earnings growth and momentum, and this stock does get an “A” grade in his system.
SPWR and Suntech Power (STP) have been the standard-bearers for solar power in recent years — SunPower because it has had the most efficient cells, STP because it had the lowest costs. That may well be changing gradually as relative upstarts like FirstSolar, the thin film solar developers, and the lower cost Chinese companies try to build market share. Still, the market is growing so quickly that there’s something to be said for owing the big dogs who have the clearest accounting and a strong product track record like SunPower.
I have no idea who’s going to win the solar wars, and in fact I sold my only related company a few weeks ago (MEMC Electronic Materials, sold for personal portfolio reasons, not because of any immediately bad prognosis I see for the company), but I would probably be more comfortable with SPWR than with some of the smaller or more highly-valued companies in the sector. And truth be told, since Cypress is likely to track with SPWR at a lower valuation until the rest of their SPWR position is spun off, I’d probably buy CY before SPWR (that’s assuming that the underlying semiconductor business has some value, a position the market in general doesn’t seem to accept at the moment). CY has gotten some recent tax decisions that make a spinoff of the rest of SPWR to shareholders likely at some point, though I don’t know that a timetable has been set.
Everyone, it seems, has an opinion on solar stocks — I know Jim Cramer yells at anyone who suggests a purchase of anything other than First Solar … and several touts have picked SunPower in the past year, including Andrew Gordon for a 50% gain if held until now. Navellier also picked SPWR earlier this year, at closer to $120, so that pick has a 25% haircut at the moment.
But it’s your money — what’s your call?
Personal Capital is an advertiser with Stock Gumshoe, but Travis also uses it every day for his personal accounts and finds it invaluable. Here's what he said: "They offer a great (and genuinely FREE) 'second opinion' for your financial plan, but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.