SunPower (SPWRA) saw an increase of more than 10% in its stock price on March 15. This trend was seen across almost all companies in the solar industry, including SunPower's competitors FirstSolar (FSLR), SuntechPower (STP), and Yingli Green Energy (YGE).
Our price estimate for SunPower's stock is at $14.41, about 10% below its current market price.
So why the renewed interest in the solar industry?
With the nuclear disaster in Japan, new questions regarding oversight and the safety of nuclear power have surfaced. Costs for nuclear energy plants will undoubtedly rise as regulations become more stringent and current ones are more closely enforced -- this will mean higher costs for the nuclear power industry. Alternatives like solar and wind energy in additional to traditional forms of energy should fill the void to help meet rising global energy needs.
To understand the potential market size, nuclear power contributes almost 20% of the electricity generated in the U.S. and represents almost 9% of the total energy output for the country. In contrast, solar power contributed to less than 0.1% of the total energy output for the year 2010.
Other global developments and their impact
Most developed countries have agreed to an increase in the share of renewable energy sources in their energy portfolio. In the recent past, adoption and implementation of solar and wind energy systems has been given an impetus by governments providing direct subsidies and other economic benefits to companies undertaking such projects.
In 2007, Japan was the leading producer of photovoltaic or solar cells in the world, accounting for more than 25% of the world's output then. Today China leads the industry in solar component production due to significant government spending on the industry as well as low-cost advantages, and Japan contributes around 10% of the world's solar component requirement.The earthquake and resulting turmoil in Japan will directly affect the country's solar output, at least in the short term.
What does SunPower have to offer?
SunPower is a manufacturer and distributor of silicon-based solar cells. It produces solar power products for installation on residential and commercial units. The company's acquisition of PowerLight Corporation also allowed it to foray into large scale utility-sized power. SunPower's competitive advantage comes from its ability to manufacture the most powerful and efficient solar cells in the world. This would give the company an edge over other competitors in providing components for utility and power applications.
We had initially estimated that SunPower would reach about 270 megawatt of component shipments for utility and power applications by 2013. In view of the recent events and if the adoption of solar outpaced our current estimates to reach 450 MW by 2013, this would add around 10% to our price estimate with a price estimate of around $15.80.Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.