SPWR

[stocky]

Its the second of the three Solars which I think we should have in 3SoF not withstanding its current market cap. I will post more on it later.

[stocky]

I own SPWR both in my personal and Strategy Lab Open accounts.

[Leaira]

I'm not in SPWR right now.  I'm bullish on the sector, but the stock hasn't given me a bullish entry yet.  It broke below the 20EMA and might test the 50EMA.  If it bounces from there, I might get into a 100/95 bull put spread.  I don't want to do a bear call spread cuz the sector is bullish.  I'd prolly have to end up unwinding out of the bear call spread.  I know that doing so can make you a fortune on the remaining long option, but I'd just rather have as many of my trades as possible work out from start to finish.

[stocky]

There is a good chance that SPWR will be pulled to low 100s, so dont worry I hope you will get a good entry. Market is still shaky and bears willing to sell.

[David Randolph]

Just posting a chart since the IPO for SPWR:

[David Randolph]

Fundamental Case:

I've been reading reports showing that with the current plans for capacity expansion among solar companies the solar industry will be in an oversupply position in 2010. This has been making me think about the many $5 B - $10 B "traditional" solar companies out there, especially the Chinese ones, I mean, they're so many doing exactly the same thing.

We know from past experiences that many Chinese companies don't show much respect for shareholders outside of China, holding ADS's. By "respect" I mean, they're more concerned about filling their pockets with cash right now than increasing the share price.

SPWR, an $8.4 B market cap, is a perfect example, look at what they say in their earnings release yesterday:

«On a GAAP basis, SunPower reported gross margin of 19.5%, total operating income of $14.8 million and diluted net income per share of $0.15. These figures include non-cash operating expenses for amortization of purchase accounting intangible assets of $4.3 million and non-cash, stock-based compensation of $14.5 million.»

Stock based compensation is as much as operating income

Analysts just refer to the non-GAAP metrics, look, they say SPWR beat the consensus estimate by 2 cents ha ha ha

So, the GAAP number was 61% lower than the non-GAAP number because essentially, management is stealing shareholders and analysts opt to ignore it, reiterating their "buy" ratings.

Yet, the stock fell 12.8% on the news with very strong volume. This tells me that, despite analysts talk, the smart and heavy money is leaving SPWR for good.

Technical Case:

I thought about selling STP short instead, because its chart is weaker, but the fundamental case isn't as weak or immediate. Anyway, here's SPWR's chart:



The medium term trend is bearish and SPWR reacted negatively to resistance.

Over the short term the analysis is simple, yesterday was a very significant day, both from a fundamental and technical perspective, so SPWR shouldn't close above the midpoint of the red candle for downside momentum to continue, essentially, for bears to be right and fast, which is what I'm looking for when selling stocks short:



Trading Plan:

Sell SPWR short at today's open. Buy to cover if the stock is set to close above $90.59. Eventually take a 30% profit.

[David Randolph]

SPWR's bulls gave more fight than I thought on Friday (probably just due to the general market's bullishness), but in the end they lost the battle for the midpoint at $90.59.

The trading plan remains intact:

Buy to cover if the stock is set to close above $90.59. Eventually take a 30% profit.

[David Randolph]

SPWR was taken out of the Technimental Portfolio at yesterday's closing price ($93.5), according to the previously set trading plan:

Buy to cover if the stock is set to close above $90.59. Eventually take a 30% profit.

I took a small loss and will move on.