SunPower Corporation [NASDAQ: SPWR] was a big winner on Tuesday’s trading, closing the day at $10.51 representing gains of 22.58%. This followed news that Goldman Sachs had upgraded its outlook for the stock from neutral to buy. Goldman Sachs is the latest to upgrade its outlook of this stock, after Credit Suisse did the same in September 2018, when it upgraded it from neutral to outperform.
A look at its premarket trading activity indicates that it could be in a pullback after yesterday’s breakout. At the time of writing, it is down by 3.45%, and trading at $9.80. If bulls retake the market when markets open, and push it above yesterday’s high of $10.98, it would be a signal to a possible continuation of Tuesday’s bullish rally.
One factor that could contribute to a bullish continuation is strength in the overall market. Yesterday, markets saw a huge surge in value following news that the U.S and China are proactive in trying to resolve their trade issues, ahead of the G20 summit. SunPower being a high beta stock could continue its bullish run, if the stock markets start to rally again on positive U.S-China news.
Besides this stock’s intra-day price action, there are a number of factors that may favor this company in coming years. The first one is its strong manufacturing base in the U.S. Most of its manufacturing is done within the U.S, which means, it is unaffected by the ongoing trade war between the U.S and China. On top of that, the company has exemptions to some of the materials that it gets from outside the U.S. This is a huge safety net considering that no one can predict when the trade war between the U.S and China will come to an end, or what its effects will be on the markets.
Government policy is also strongly in favor of this company’s long-term demand. For instance, in the State of California, all new residential buildings are supposed to have solar power from the year 2020. This will spur the demand for SunPower products in California and drive up its revenues. Given its strong market presence in California and all across the country, SunPower is well positioned to dominate residential solar market in this State. It is a factor that may play in favor of the company’s stock and one that reflects positively on Goldman Sachs decision to raise its projections of this stock from neutral to buy.
SunPower’s internal fundamentals, such as U.S-based manufacturing are well aligned with external market factors such as shifting policies in favor of renewable energy.