Stock Groups

SunPower announces restructuring aimed at doubling down on residential market


SunPower tiles were installed on San Ramon homes by workers from construction, Calif.

Robert Nickelsberg | Getty Images

SunPowerTuesday saw the announcement that it was restructuring operations to further concentrate its efforts on the rapidly growing residential solar market. Blue Raven is the company’s residential solar provider. The company also plans to sell its industrial and commercial business.

Peter Faricy from SunPower stated the acquisition was natural for several reasons. Blue Raven is customer-first and aligns well with SunPower’s mission. Blue Raven has more customers than 90%, and only 5% of SunPower sales are from these 14 states. SunPower will now have a wider customer base in areas where it has had difficulty gaining market share.

Faricy explained that “from a strategy perspective, this transaction allows us to service consumers much quicker than we would otherwise,” and that it will result in revenue growth as well as EBITDA from day 1.

SunPower will be adding more customers from Blue Raven to its existing 376,000 residential customers.

With the required cash to complete the transaction, the total deal value is $165 million. SunPower used operations cash to finance the acquisition. Most of that money was raised by selling 1 million shares. Enphase Energy

Concentrating on residential solar

Faricy stated that the industrial and commercial solar segments are attractive and have great potential for growth. However, Faricy explained that the decision to sell this division was based on capital allocation and the need to streamline the business.

Faricy noted the interest in his unit from potential buyers but didn’t reveal any names. Faricy pointed out the attraction of the asset by pointing out that SunPower makes money through managing commercial and industrial contracts. A future owner would be able to take advantage of both financing and managing the operations.

SunPower will use money from potential sales to invest into its new core residential business. It plans to do this by acquiring customers and expanding digital services for homeowners.

Faricy explained that she was happy to provide clarity for investors in our case regarding this single-focused strategy, which focuses on residential going forward.

SunPower isn’t the first to undergo a restructuring in this area. The company created a photovoltaic module manufacturer in August 2020. Maxeon SolarAlthough they are separate entities, the two still function together.

Faricy took over as CEO of SunPower in April. Faricy served previously as the global CEO for direct-to consumer at Discovery Inc.

While industrial and commercial solar are viable growth options, SunPower’s main source of revenue is from its residential customers.

For the full year 2020, sales of residential and lightcommercial totaled $848million. Commercial and industrial brought in $254.8million. It is also much more profitable. The gross margin per watt increased from $0.19 to $0.66 in 2019, while the margins for the commercial or industrial division decreased from $0.25 and $0.06 over the same time.

Faricy stated that the facts show that residential businesses are larger and more lucrative.[Residential]It is the best place to put our focus as we go forward and we think it will be well received.

SunPower’s future vision is to serve as a one-stop shopping destination for consumers. The company will not have a single customer relationship after the system is installed. Instead, it is expanding energy storage capabilities, electric vehicle capabilities, and other digital products, such as energy management systems.

Although residential solar installation has increased in recent years and now accounts for 3% of all homes, only 2.7million (or 3%) had rooftop panels at the end 2020. The climate agenda of President Joe Biden calls for the solar portion to increase from its current 3%. 40% by 2035This is. These goals will be achieved by increasing solar installations in the coming years.

However, investors who want to profit from long-term trends may not get the opportunity they need. After an impressive 2020, solar stocks are expected to suffer in 2021. Among the reasons for this decline is supply chain bottlenecks and rising raw material prices.

Faricy said that SunPower was largely protected against the chip shortage and stated that they have visibility until the end of each calendar year. He acknowledged, however, that it is difficult to secure parts and supply chains can be a “lifelong struggle.”

Shares of SunPower are up nearly 6% over the last month, aided by a nearly 10% gain last Friday after S&P Dow Jones Indices announced that SunPower would be addedThe S&P MidCap 400The closing bell will sound on Tuesday. These are the Invesco Solar ETFThe corresponding drop in a month is 10%.

SunPower shares rose 2% in premarket trades on Tuesday.

You can become a better investor by becoming a smarter one CNBC Pro 
Stock picks, analyst calls and exclusive interviews available on CNBC TV 
Register now to get started free trial today