SunPower Sinks On Capacity Constraint; Analsysts See Strong Demand

SunPower (NASDAQ: SPWR) fell more than seven percent Friday on worries about its capacity constraints, even as analysts applauded its recent experience of strong demand.

Despite the solar panel-maker's 28 percent drop in second-quarter profits on a 12 percent decline in revenue, results beat consensus views Thursday and the company offered an in-line 2014 outlook.

Although SunPower expects to boost production capacity 40 percent by 2017, "near-term upside is limited" by current manufacturing constraints, Morgan Stanley's Timothy Radcliffe said in a note Friday.

Radcliffe, who maintained a Hold on the company, also cited a "lack of catalysts" in the next couple of quarters in addition to limited growth.

A company factory called Fab 4 in the Philippines will begin production in the first half of 2015 while an additional factory, at least twice as large, is slated to come on line in 2017.

"We're still evaluating locations for capacity expansion beyond Fab 4," Chief Executive Thomas Werner said in a conference call Thursday. Werner said the company will update investors on the plan by the end of the year

Bank of America's Krish Sankar maintained a Buy rating Friday, citing its growing backlog and pipeline of pending projects.

Sankar raised his target to $44, from $41, based on its outlook.

Brean Capital's Michael Gaugler upgraded SunPower to a Buy with a $41 price target and called prospects for growing market demand are "surprisingly good."

Still, Gaugler said SunPower's failure to offer a 2015 outlook may hold back its share price in the near term.

SunPower traded recently at $33.97, down 7.5 percent.