SunPower Faces Concerns Over Cash Generation, Stock Downgraded to Sell

SunPower stock saw a decline on Friday following concerns expressed by Guggenheim about the company's long-term ability to generate cash. Analyst Joseph Osha downgraded his rating of SunPower from Neutral to Sell and assigned a price target of $1 for the stock.

The downgrade came shortly after SunPower announced that it had secured a second-lien term loan of $175 million from major shareholder Sol Holding. This move was seen as a critical step for the company, as it had previously indicated doubts about its ability to continue as a going concern.

However, Osha expressed skepticism about the loan's impact on the company's underlying problems. In a research note, he stated, "Once 2024 is past, we do not believe that the company is likely to be able to produce free cash flow on a sustainable basis."

Truist Securities analyst Jordan Levy, while not recommending selling the stock, adopted a cautious approach with a Hold rating and a price target of $3.50. Levy emphasized the need for tangible execution on profitability enhancement initiatives to gain confidence in SunPower's future trajectory.

Osha also raised concerns about another aspect of the financing deal. As part of the agreement, SunPower agreed to issue warrants to Sol Holding for the purchase of 41.8 million shares at a price of one cent per share. Osha viewed this financing arrangement as highly dilutive for equity shareholders.

Notably, SunPower has not yet responded to requests for comments.

As of premarket trading, SunPower shares recorded a 12% decline, trading at $3.77. This decline adds to the stock's overall decrease of 74% over the past year.