The Sun Also Rises

07/28/2006 12:00 am EST


Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

With oil prices reaching peak after peak, draining consumers’ and businesses’ pocketbooks, more attention is being paid to alternative energy sources. Here Ian Wyatt’s Growth Report exposes’ one of solar energy’s upcoming and profitable best kept secrets…

"Solar stocks will again rise to higher highs. Pick your day, a price target for oil, the current temperature reading in the Middle East (or the Midwest for that matter) and you've got a snapshot of the alternating euphoria and uncertainty that's been plaguing the cleantech/alternative energy markets.

"And yet, solar remains one of Wall Street's darlings. As earnings emerge from some of the industry's largest solar vendors—Sunpower (SPWR NASDAQ) for example—the market remains hopeful that the love affair with all things cleantech will continue. Editor’s note: SPWR earned $5.4 million, or $0.08 per share in its second quarter, up from last year’s loss of $6.3 million.

"From SunPower's perspective there's nothing about the business that seems uncertain or fleeting. Investment bank Cowen & Company estimates 2006 revenue growth of 180% (to $220 million) and another 57% in 2007 (to $345 million).

"With parent company Cypress Semiconductor (CY NYSE) holding about 70% of diluted shares, SunPower continues to expand worldwide. Now operating three solar cell production lines and installing a fourth, the company recently bought another plant near its existing Philippines facility, which has the capacity for up to ten additional production lines, estimated to begin production by Q2 of 2007. Cowen maintains an "outperform" rating on SunPower, expecting further upside to manufacturing production and 'revenue per watt' over the next 12 months.

"Yet the naysayers may be partly right, in the short term, at least. SunPower went public last November and quickly more than doubled its IPO price, to a high of $45.09. Then in June, SunPower issued seven million shares at $29.50 per share to help fund expansion and lock in silicon supply. Yet, share prices have continued to tank, even though most analysts are trying to support the stock. Cowen believes SunPower will outperform the market by 40 percent over the next 12 months, though other sources suggest upcoming weakness in natural gas prices implies even more trouble for the solar market.

"With China and India widely recognized as major new consumers of the world's energy supply, there's more than enough interest on the demand side to make solar a real sector for a long time to come.

"As SunPower's numbers once again prove the company's high growth trajectory and high demand for anything solar overall, I suspect the sector will again rise above Wall Street's current shadows and begin yet another path upwards. It may be a choppy path higher, but solar will indeed rise again."

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