Why SunPower Stock Broke Friday

Solar power (NASDAQ:SPWR) the stock is on a roll. After a weak start to the week, for three consecutive days, shares of the residential solar energy specialist rose. Including Friday’s gain (up 9.1% through 11:30 a.m. ET), SunPower stock is now up 13% for the week.

Credit for the stock’s strong final performance likely goes to the Solar Energy Industries Association (SEIA) and a report it released midday Thursday.

What SEIA says about solar energy

According to the SEIA report, the first quarter of 2024 was the second best quarter Never for the solar energy industry in America, with 11.8 gigawatts of DC solar power added to the grid. Moreover, this quarter was the second after the fourth quarter of 2023, which was the previous quarter, which means that solar companies have just booked their two Best quarters ever!

That’s the good news. Now here’s the bad news for SunPower stock: 9.8 of those 11.8 gigawatts installed in the first quarter of 2024 were utility-scale solar projects, a segment of the solar market that SunPower no longer serves. Instead, SunPower focuses on installing residential solar panels in homes.

And according to SEIA, that This segment of the solar market collapsed in the first quarter, down 25% year-over-year.

Is SolarPower Stock a Sell?

The SEIA attributes the drop in demand to California’s decision to compensate homeowners for the solar power they contribute to the grid at lower rates than they pay for electricity purchased from the grid, a concept known as net billing. Bluntly, SEIA explained: “The promise of future market growth in California has vanished with (this) decision. »

Whatever the reason, this leaves SunPower in an unenviable position. After posting strong profits early in the pandemic, the residential solar company posted losses: $247 million lost last year, with more than $200 million in negative free cash flow. Analysts expect the company to eventually return to profitability. But first, SunPower is expected to lose money this year and next year as well.

I wouldn’t be in a rush to buy this stock, especially after today’s rally.

Should you invest $1,000 in SunPower right now?

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of…

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