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How SunPower Is Looking To Outgrow The U.S. Residential Solar Market

Thomas Werner, chairman and chief executive officer of SunPower Corp., speaks during the 2018 CERAWeek by IHS Markit conference in Houston, Texas. Photographer: F. Carter Smith/Bloomberg© 2018 Bloomberg Finance LP

SunPower, one of the largest U.S. solar equipment manufacturers, published its Q4 2018 results on Wednesday, reporting a stronger than expected set of earnings driven by its distributed generation operations, although its outlook for 2019 fell short of market expectations. In this note, we take a look at some of the trends that are impacting SunPower’s bread-and-butter U.S. residential business.

See our interactive dashboard analysis on what to expect from SunPower in 2019. We note that our model has not been updated for the company’s recent earnings release. See all of our data for Energy companies here.

Why SunPower’s Residential Business Could Outperform

SunPower’s adjusted revenues for the residential business came in at $174 million for Q4, marking an increase of about 15% on a year-over-year basis, with shipments rising by a similar level to around 75 megawatts. SunPower said that its systems were installed in over 50% of new U.S. homes over 2018. The U.S. residential market is expected to post reasonably strong growth going forward, with installations rising from about 2.5 gigawatts in 2019 to over 3.5 GW in 2023, and SunPower has indicated that it expects to grow at a faster pace compared to the market, leveraging multiple trends. Firstly, the company is transitioning to its next-generation panels, dubbed NGT, which offer high-efficiencies (about 23% efficient) at prices that are closer to commodity panels, allowing the company significant product differentiation. The company expects over 100 MW of NGT panel deployment during 2019, with capacity expected to ramp-up to 250 MW by the end of the year.

SunPower is also likely to benefit from some regulatory tailwinds. For one, the company was exempted from Section 201 import tariffs on solar products, in a move that should make its silicon panels more cost competitive compared to imported rivals. Separately, California has mandated that all new homes will need to have solar panels installed on them, starting from January 2020. This could benefit SunPower, which is the market leader in the state. SunPower is also looking to expand its storage business as battery costs continue to decline. The company has its residential solar systems installed on approximately 240,000 homes, and it’s possible that it could leverage these homes to retrofit and upsell its storage solutions. The company has indicated that it expects this retrofitting business to accelerate in the second half of 2019.

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