Bad news for SunPower(NASDAQ: SPWR) investors: On Monday, Scotiabank analyst Tristan Richardson lowered his price target on SunPower stock to $4 a share, a $2 drop.
Great news for SunPower investors: $4 a share is 101% more than SunPower stock cost Monday morning. And investors who buy this solar power stock can therefore expect to double their money in a year.
At least, according to Soctiabank they can.
Is SunPower stock a buy in 2024?
Quoted on The Fly Monday, Richardson explained he cut SunPower's price target because green energy stocks have been underperforming this year and inventories are still bloated. But the analyst remains optimistic that "inventory channel clearings are nearly complete" and so the bottom is not far off. Combined with rising electricity rates, that's going to create more demand for cheap solar power, and create the potential for SunPower's sales to turn around.
Is he right?
As the saying goes, it's hard to make predictions -- especially about the future. Still, if the "bottom" has truly already arrived for solar power stocks, then it's arrived remarkably quickly. In related cyclical industries such as semiconductors for example, oversupply cycles ordinarily take six to 18 months to reverse. But SunPower's sales have only been falling for a couple of quarters. According to data from S&P Global Market Intelligence, sales were still on an upswing as recently as the second quarter of 2023!
While it's possible SunPower's going to get away with just a six-month downturn, therefore, I wouldn't bet on it. And I wouldn't bet on a company valued at $380 million, and burning more than half that amount ($201 million) in cash every year, doubling over the next 12 months either.
More than likely, SunPower stock still has at least a few more rough quarters ahead of it.
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 recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.
