SunPower Got Crushed: What You Need to Know

Updated

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of solar powerhouse (and Total (NYS: TOT) subsidiary) SunPower (NAS: SPWRA) ended Monday down 12%, hurt by a cryptic note from the company's CFO, who warned that SunPower plans to "revise" its full-year earnings forecast when it reports earnings on Nov. 3.

So what: SunPower didn't specifically say that earnings will be revised down -- but that was the clear implication. The CFO mentioned "challenging market conditions," and challenging is rarely a good adjective when used in the context of earnings forecasts.

Now what: I won't say "I told you so" (but I did). Reviewing the company's numbers last month, I described how even an optimistic reading of the stock made it look pricey at "47 times earnings." (Make that 27 times earnings, now that the stock has fallen so far.) Meanwhile, a more skeptical examination revealed that the company was not really "earning" anything at all -- but rather "burning cash at the rate of $155 million annually."

That's still my opinion, and I'm sticking to it.

Want to learn more about SunPower?Add it to your Fool Watchlist.

At the time thisarticle was published Fool contributorRich Smithdoes not own (or short) shares of any company named above.Motley Fool newsletter serviceshave recommended buying shares of Total. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Advertisement