Thursday, October 18, 2007

Stock of the Day

My stock of the day is SunPower (SPWR).

The company reported earnings this morning that were solid. EPS beat consensus, and the company issued basically in-line guidance.

The stock sold off in early trading, likely on some initial disappointment that the company didn't raise guidance more. But I think that management was simply being conservative, as they have a short history of doing, which makes it more likely that they will beat the estimates again next quarter.

But that type of thinking slowly crept back into the market, and the shares began to recover. Then the company held its conference call, and a full blown upside reversal was in the works.

A look at the chart above shows how the stock reversed higher from its lows, and has carved out a large upside reversal. Additionally, volume has surged on the move.

Management indicated several positive factors, and forecasted continued growth in 2008 and beyond. They highlighted several large projects, and some foreign markets poised for significant growth.

They also commented that gross margins should approach 30% in 2008. I think this is well above where most analysts were modeling, which was more like 25%.

BIA is long SPWR


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