Don't Close the Blinds on SunPower Stock Just Yet

SPWR's recent pullback has found chart support

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Alternative energy stalwart SunPower Corporation (NASDAQ:SPWR) announced on March 18 that it would be offering qualified homeowners new low annual percentage rate (APR) loans for residential solar and storage customers. The new loan would allow customers to generate their own energy with a solar system for as low as $72 per month while also allowing SunPower to attract a wider range of residential customers.

It's been an odd year for SunPower stock. After racing to a 13-year high of $57.51 on Jan. 29, the shares have sharply pulled back to consolidate above $30. The good news is chart support appears to be forming at SPWR's 100-day moving average. The bad news is shorts are likely cheering the recent skid, and a healthy 22.7% of the stock's total available float is sold short. Analysts meanwhile, remain pessimistic, with 12 of 13 in coverage maintaining "hold" or worse ratings. But here at Schaeffer's this could set up the equity as a possible contrarian play with a convenient entry point.

SPWR Stock Chart

From a fundamental point of view though, SunPower is still lacking in a lot of key areas but has been able to show strong net income growth in recent years. In fiscal 2020 SunPower increased its net profits by about $576 million, or 2700%, bringing its total net income up to $598 million. Additionally, SPWR has added about $1.45 billion in net profits over the past four year, climbing up from $851 million in net losses for fiscal 2017.

On the flip side, however, SunPower’s revenues have seen a $740 million, or 40%, reduction over the past year. The company’s total annual revenues currently stand at $1.1 billion. Prior to fiscal 2020, sales would fluctuate above and below $1.8 billion with little consistency. Overall, the biggest issue for SPWR is its valuation. Despite its run of bearish form, SunPower stock still has a huge forward price-earnings ratio of 79.37.

Now could be a good time to weigh in on SunPower stock's next move with options. The equity's Schaeffer's Volatility Index (SVI) of 88% sits higher than only 9th percentile of all other readings from the past year. In other words, options players are pricing in lower-than-usual volatility expectations right now. Lastly, the security's Schaeffer's Volatility Scorecard (SVS) sits at an elevated 85 out of 100. This indicates the security has exceeded volatility expectations during the past year.

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