Citi Downgrades SunPower (SPWR) to Sell, 'forward estimates need to come down'
Citi analyst Vikram Bagri downgraded SunPower (NASDAQ: SPWR) from Neutral to Sell with a price target of $4.50 (from $10.00).
The analyst comments "We downgrade SPWR to Sell/High Risk as we believe forward estimates need to come down, strategic initiatives will take longer to implement, market share could be at risk, and liquidity remains tight. We model $51mm in EBITDA for FY23, below consensus of $56mm and below guidance low-end of $55mm. Demand has improved sequentially but was still down heavily at -70% Y/Y in August in CA. SPWR has partially cut back on opex but investments in existing customer experience are a key strategic priority, which means opex could remain persistently high. Weak demand should mean that elevated inventory takes longer to deplete and that the GM benefit from lower hardware costs is delayed. Reducing Opex sharply would increase the risk of market share loss (consensus modeling 3% Y/Y increase in MWs shipped in 2024 in a down market). Finally, lower NT cash flow also reduces the company’s liquidity cushion vs. $100mm liquidity debt covenant while raising additional capital would be costly."
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Shares of SunPower closed at $5.79 yesterday.