Solar stocks struggled across the board in 2021 - our ETF performance scanner shows Solar, represented by the Invesco Solar ETF [TAN], is the fourth-weakest performer across more than 30 themes, having dropped -26.48% over the last year to 4 January's close.
Solar installer SunPower's stock itself dropped -18.60% in 2021, but perhaps this could be the year that secular trends make solar a theme to watch, and in turn provide the backdrop to enable California-based SunPower Corp to record some consistent growth.
So, what's the wider view of the solar sector among analysts, and are there any tailwinds that could make 2022 a better year for SunPower?
It's almost a year since SunPower stock hit its 52-week high at $57.52, back on 29 January 2021. Can this solar stock regain those levels? The stock certainly made a solid start to the year, moving off its pre-Christmas 52-week low at $19.34 recorded on 20 December, gaining 15.56% by 4 January, as the shares reached an intraday high of $22.35.
However, SunPower stock fell back on Wednesday 5 January, losing 8.13% to close back below the $20.00 level, at $19.78. This follows a disappointing December, where Sunpower's shares plunged 27.15%, to $20.87.
Raymond James' Pavel Molchanov is one analyst bullish on solar over the longer term, after upgrading SunPower stock from Market Perform to Outperform earlier this week, despite recent headwinds. Molchanov also upgraded fellow solar stock, First Solar [FSLR], to Market Perform from Underperform.
According to Barron's, Molchanov is predicting secular growth in electricity market penetration across multiple countries, based on two key factors: evolving demand for solar power, and as solar hardware becomes cheaper over time.
Molchanov's positive outlook comes despite SunPower stock taking a double hit in December, along with other solar stocks, after California unveiled a new metering proposal for solar power companies, in addition to, "the apparent demise of the Democrats' social spending initiative that would have extended a key tax credit", report Barron's.
According to Molchanov though, "the stock's reaction to these headlines was overdone", after the stock fell close to 30% last month. The Raymond James analyst's positivity stems from his view that the California proposal is still likely to be modified, and that Congress could extend the tax credit separately to the 'Build Back Better' plan.
In December, the company launched financial services arm SunPower Financial, as it aims to make renewable energy affordable to more American homeowners. It will offer a 0% interest rate to certain customers, as it looks to take advantage of the US residential solar market, which is predicted to quadruple by 2030, with roughly one in eight American homes having solar, according to research consultancy Wood Mackenzie. It means that homeowners can opt for solar with no initial payment, as well as lower monthly payments, higher credit limits, and a faster application process, according to the firm's December press release.
As part of the company's focus on the residential solar sector, SunPower is in advanced discussions regarding a potential sale of its commercial and industrial solutions (CIS) business, reports PV Tech. The sale, which could be confirmed in Q1 2022, should help SunPower to optimise capital deployment, while also giving CIS the opportunity to fight climate change on a larger scale, said CEO Peter Faricy.
SunPower was upgraded by Raymond James to an Outperform rating on Tuesday, while Molchanov has put a $26.00 price target on SunPower stock, pointing to a potential upside of 31.44% from the stock's $19.78 Wednesday close.
A number of other analysts have also made recent rating changes, most recently Morgan Stanley, who raised its price objective on SunPower from $26.00 to $27.00 and gave the company an Underweight rating on 1 December.
Overall, SunPower stock has three Buy ratings, along with five Hold and five Sell ratings, according to MarketBeat, giving the company an average rating of Hold. With an average price target of $27.08, analysts give SunPower a consensus potential upside of 36.91% based on Wednesday's closing price.
SunPower has had a difficult time recently, but the company is making strategic changes to enable it to capture a residential solar market which is expected to grow rapidly. While its 52-week high north of $50.00 remains a mere speck on the horizon, imminent changes at both an organisation and industry level could offer the stock an opportunity to make up some of that lost ground as the year unfolds.
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