California-based world-leading solar manufacturer SunPower reported tepid results in its Fourth Quarter and Full Year 2017 results last week, with revenues down 35% year-over-year and First Quarter and Full Year 2018 revenues well below expectations due to the impact of Donald Trump’s 30% solar import tariff.
In the middle of last week, both SunPower and SolarEdge announced their Fourth Quarter and Full Year 2017 financial earnings reports, and it was definitely a tale of two very different cities (see here for SolarEdge report). Despite reporting above expected Fourth Quarter earnings of $100.3 million and revenues of $658.1 million, SunPower limped to the finish line with Full Year 2017 revenues down 35% year-over-year and made matters worse by predicting a hefty impact made by the recently-announced 30% US solar tariff on imported cells and modules. SunPower also reported increased net loss for the quarter and double for the Full Year.
The real issue with SunPower’s report, however, was less how it had done but more how it is expected to perform, with the company’s 2018 guidance well below consensus. SunPower is expecting non-GAAP revenue of between $300 million to $350 million in the first quarter, a gross margin of 4% to 6%, adjusted EBITDA of $5 million to $25 million, and a total megawatts (MW) deployed in the range of 275 MW to 305 MW. For the Full Year 2018, SunPower is predicting non-GAAP revenue between $1.8 billion to $2.2 billion with 1.5 GW to 1.9 GW deployed.
The extreme divergence between how well SolarEdge and SunPower performed last week comes down to their respective business models, as I explained in the SolarEdge report. Specifically, the 30% solar import tariff imposed by Donald Trump will likely hit SunPower harder than SolarEdge due to the fact that SolarEdge focuses primarily on residential and commercial solar operations — where the tariff will impact a smaller slice of a project’s costs — while SunPower focuses more on utility-scale solar, where the tariff will impact a much larger part of the costs, thus resulting in greater losses for SunPower.
“Unfortunately, we are already seeing a negative near-term impact from the ruling as the increased costs due to import tariffs have delayed certain 2018 projects and made other projects uneconomical,” explained Tom Werner, SunPower president and CEO. “We have also put our planned $20 million US employment expansion on hold and are considering other significant cost-saving initiatives to lower our overall expense structure and improve our financial performance.”
It’s honestly early days yet as SunPower (and its competitors) look to make the best of the solar tariff ruling. This can be seen by the hit taken by SunPower’s stocks which was almost immediately reversed as common sense took hold.