Maxeon Solar has a 40 per cent upside, says Roth

Sunny skies are up ahead for Maxeon Solar Technologies (Maxeon Solar Technologies Stock Quote, Charts, News, Analysts, Financials NASDAQ:MAXN), according to Roth Capital Partners analyst Philip Shen, who reviewed the latest news from the company in a Wednesday report to clients. Shen upgraded Maxeon to a “Buy” rating, saying profit margins should improve over the remainder of the year and beyond.

A 2020 spinoff from SunPower Corp, Maxeon Solar makes branded solar modules, which in the United States are distributed by SPWR under a two-year supply agreement and in China it has its P-series modules distributed by HSPV, a joint venture with TZS.

Maxeon reported its first quarter 2023 results last month, coming in with revenue of $318 million compared to $223 million a year ago and GAAP net income of $20 million versus a loss of $59 million a year earlier. Adjusted EBITDA was $31 million compared to negative $34 million a year ago.

“Our DG business benefited from prudent supply chain management and solid ASP execution in Europe, combined with expanded profitability in the US,” said CEO Bill Mulligan in a press release. 

“In our North America utility-scale business we booked several new projects in the first quarter, with production now booked out through 2025 and allocated based on sold options into 2027. Based on strong customer demand, we are actively looking for opportunities to expand our North American supply chain, including progressing our application with the DOE Loan Program Office for a domestic cell and module facility,” he said.

Shen called the Q1 topline healthy at $318 million compared to his estimate at $325 million and the consensus call at $328 million and near the midpoint guidance. Management’s Q2 outlook also looks strong, according to Shen, at $360-$400 million in revenue versus the prior consensus at $356 million and Roth’s estimate at $354 million. The growth is supported by a predicted uptick in US business, while shipment guidance was also strong. Gross profit guidance was higher than expected at $49-$59 million compared to the prior consensus at $46 million and Roth at $41 million.

Shen said that although the US residential solar average selling prices have declined meaningfully, he sees a path for Maxeon to maintain its premium IBC (Interdigitated Back Contact) solar module pricing up ahead.

“With strong Q4/Q1 results, investors have started to take note of the potential for continued execution ahead. Despite the stock pulling back following its Q1 outperformance, we continue to see upside to the stock, especially with a DOE loan guarantee announcement as a strong positive catalyst around the corner,” Shen said.

With the update, Shen asserted a 12-month target price of $40.00 per share, which at press time represented a projected return of 40 per cent.