SunPower Sucking Wind

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Pacific Crest conducted some channel checks in the California solar market and found that SunPower (SPWRA) is losing market share to low cost competitors like Sharp, SolarWorld and Suntech (STP).

Pacific Crest analysed data from companies applying for the California Solar Initiative. Their analysis falls in line with things we’ve heard from FBR Capital.

Barron’s: SunPower continues to dominate the residential market for CSI applications; however, this market is growing only marginally compared with the growth in all the other sectors. SunPower has been trying to maintain its premium pricing structure, but we find the gap to be widening and SunPower’s competitors to be winning market share. SunPower’s margin profile could be at further risk if the company cuts prices significantly to stem the losses.

SunPower’s management team will not agree with our assessment that the company is losing market share. SunPower contends that completed projects rather than applications should be analysed, because the module supplier can be changed during the install process. This rearview-mirror analysis clearly shows SunPower in a dominant position, but it also tells the investor nothing about future trends. We contend that application data (culled to remove any erroneous data, including withdrawn and cancelled applications) give the investor a better view of future trends. We believe this to be especially true in a declining price environment where the solar consumer is most concerned with not only the price of the system, but also the ultimate cost of the electricity being produced.

If SunPower continues to maintain its premium-pricing structure while professing its dominance in both brand and technology, we believe further market-share losses are a likely outcome given the very competitive and substitute products offered by Sharp, SolarWorld and Suntech.

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