SunPower's 'extreme' meme-stock surge has this analyst predicting a steep fall

By Emily Bary

Wolfe Research downgrades SunPower's stock, noting challenges ahead and 'no positive fundamental updates' this week

Wolfe Research analyst Steve Fleishman sees darker days ahead for SunPower Corp. shares after they've gotten caught up in the meme-stock momentum.

Shares of SunPower (SPWR) surged 91% across the prior two trading sessions, although they're pulling back about 30% in Wednesday action alongside numerous other meme stocks.

Still, Fleishman, who downgraded the stock earlier Wednesday, thinks more downside could yet be in store. As Fleishman bumped his rating on the stock down to underperform from peer perform, he also established a $2 price target. That was 54% below SunPower's Tuesday close and 36% below where the stock recently changed hands.

Read: SunPower, MicroCloud Hologram and other highly shorted names are riding the meme-stock wave

Fleishman called SunPower "the most extreme example of the meme-stock resurgence" among clean-technology stocks, as it benefited from "a massive short squeeze despite no positive fundamental updates."

Furthermore, the company actually had a negative update, he noted, as SunPower said Monday that it would be late with its first-quarter 10-Q filing as it deals with accounting misstatements that it had previously disclosed.

SunPower's recent positive stock momentum likely relates to its standing as a name with heavy short interest, which represented about 95% of the float. Meme-stock investors in the past have targeted stocks that are popular bearish bets as measured by the proportion of shares sold short.

Fleishman said he thought SunPower's stock would "come back to reality once the squeeze pressure abates."

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He also sees various challenges ahead, including that the company could need more funding and could secure it in a way that dilutes current shareholders. SunPower "has the ability to borrow an additional $50 [million] if needed, but this would require an additional 33.4 [million] penny warrants - much more dilutive than the first tranche of funding," Fleishman wrote.

Additionally, Fleishman said there's an uncertain outlook for the rooftop-solar-panel market in California and that SunPower is more exposed to California than some of its rivals are. "Recent earnings results across the [residential] solar space have only made investors more cautious on the pace of recovery," he wrote.

-Emily Bary

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05-15-24 1132ET

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