Sunpower Currency Woes

November 6, 2008

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Trader Mark, at FundMyMutualFund, comments on Sunpower’s warning on currency. He expects their warning is early and other solar companies will be similarly affected by currency fluctuations.

Sunpower (SPWRA) Warns on Currency

As we mentioned yesterday, solar stocks were setting up for a fall. We’re basically down to just holding positions (0.1% stakes) in our 3 names after selling the last batch into yesterday’s Obama hype.

It appears Sunpower (SPWRA) is not helping matters with a warning on currency fluctuations impacting earnings. This should not come to a surprise to the market since the dollar has gone haywire versus the Euro, but apparently it is. And as we said yesterday there are certain "arms dealers" who sell mostly within a country (China) who are not at all affected by currency (or very little) and hence the stocks should not sell off on this sort of news – but there is no differentiation in this market – so "student body left" and "student body right". We own 2 of those arms dealers but they will get sold off just as badly on this type of news. I am finding this sector almost uninvestable because there is always something that comes up that creates worries – so you have a "glow" around good news announcements and then the other 95% of the quarter the stocks sell off. This has been the pattern for a long time – it is too bad.

Shares of solar power companies slumped on Wednesday, a day after SunPower Corp (SPWRA) warned that recent gains in the U.S. dollar would hurt earnings growth in the fourth quarter and next year. The announcement was likely to be the first of many in the fast-growing solar industry, analysts said.
Shares of SunPower Corp. lost more than a quarter of their value Wednesday
"SunPower is not alone, but is early with its update," Oppenheimer analyst Sam Dubinsky said in a client note. "Most industry peers have yet to report earnings, though will likely issue guidance that points to similar headwinds."
Solar companies are vulnerable to fluctuations in the dollar-euro rate since Germany and Spain are two of the largest markets for the renewable energy source. Other European markets, including Italy and Greece, are also growing rapidly.
SunPower’s announcement sent solar stocks tumbling across the board, erasing some of the double-digit gains the industry enjoyed in the run-up to the U.S. presidential election. Investors had been buying up solar stocks on the expectation that a victory by Sen. Barack Obama would be positive for the alternative energy industry.
Late on Tuesday, San Jose, California-based SunPower said the rebound in the dollar against the euro would cut its fourth-quarter revenue by $17 million and earnings per share by about 15 cents.
For 2009, the euro’s fall will hurt revenue by $50 million and earnings per share by 50 cents.

Interestingly, California residents voted down two alternative energy policies yesterday – an interesting take on why below.

Two state ballot measures that would dramatically expand California’s use of renewable power and alternative fuels appeared headed for defeat this morning.
Proposition 7 would force California’s electrical utilities to get 50 percent of their power from renewable sources by 2025, a big jump from the state’s current goal of 20 percent by the end of 2010. And Prop. 10 would offer rebates for cars and trucks that burn natural gas or alternative fuels, with the money coming from $5 billion in state bonds.
An odd alliance of big electric utility companies and environmental groups fought against Prop. 7, saying it was so badly written that it would actually slow the development of renewable power, not speed it. And critics blasted Prop. 10 as a money grab by Texas oil tycoon T. Boone Pickens, whose company Clean Energy Fuels sells natural gas for use in vehicles. The company provided almost all of Prop. 10’s $22.5 million campaign fund.

No position