The Associated Press August 27, 2010, 12:44PM ET

SunPower shares climb after 2 upgrades

Shares of SunPower Corp. rose Friday after two analysts upgraded the stock, saying it was undervalued after a long slump.

THE SPARK: Raymond James upgraded the shares to "Outperform" from "Market Perform." Analyst Pavel Molchanov called it "a tactical rating change."

Molchanov said he hasn't been a fan of the company because of a high cost structure and thin margins, but the shares have fallen so far -- they've lost two-thirds of their value since last October -- that they're now a bargain.

Molchanov said the stock price suggested a value below the worth of the company's tangible assets, which only happens in the solar industry at companies that are more distressed than SunPower.

SunPower's earnings have been disappointing, but it does generate cash flow from operations, he said.

Soleil analyst Paul Leming raised his rating to "Buy" from "Hold." He said after the beating the shares have taken, "the risk-reward profile is positive."

Leming said the stock slump was due to weak results plus "the company's opaque business model and insanely complex" approach to reporting earnings both with and without following customary accounting standards.

Leming predicted the company "will see a surge in business in the fourth quarter -- the earnings will come through as management is forecasting."

THE BIG PICTURE: SunPower, based in San Jose, said this month it lost $6.2 million in the second quarter due to a large tax expense.

But excluding one-time items such as the tax expense, SunPower would have earned 15 cents per share, beating analysts' forecast of 10 cents per share. Revenue jumped 28 percent to $384.2 million.

One potential problem: The company operates in several European countries that some analysts believe may cut solar incentives in the coming months.

SHARE ACTION: The shares were up $1.02, or 10.2 percent, to $11.05 by late morning. They have declined steadily in the last 12 months, ranging from a high of $33.97 to a low of $9.61.


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