Forget SunPower (SPWR) And Buy These 2 Solar Stocks Instead

SunPower Corporation (NASDAQ:SPWR) disappointed investors Teusday evening after posting its second quarter earnings results. The company’s shares have lost over 30% in value since yesterday’s earnings release, and the price loss is mainly attributable towards SPWR’s lowered income guidance for this year. In May, the company had issued earnings guidance between $0 and $50 million for fiscal 2016. Now, Sunpower expects to post a net loss amounting to as much as -$175 million.

SPWR stock is a Zacks Rank #4 (Sell), so you may be better off by picking up some solar stocks that have been building earnings momentum in the form of positive earnings estimate revisions from analysts. The pay off on these stocks could be big if they surprise, and because of the positive EPS (earnings per share) revisions trending upwards this quarter, they have a strong chance of topping expectations. To capitalize on some potential gains, you should forget about SunPower for now and pick up these two “Strong Buy” ranked solar stocks instead.

Sunrun Inc- (NASDAQ:RUN)

Sunrun Inc. develops and sells residential solar energy systems in the US. The company currently operates across 15 states and also offers leasing services on its solar products for no money down. Sunrun stock is a Zacks Rank #1 (Strong Buy) and it isn’t profitable yet, but it is heading in the right direction with regards to growing revenues and minimizing net losses. Last year, company sales grew by 53% and net losses improved to -$28 million from -$71 million in 2014. In addition to demonstrating growth potential, there is value in owning RUN shares since they are currently trading at a price-to-book ratio of 0.65. A price-to-book below 1 suggests that a stock may be undervalued.

In the last 2 months, analysts have unanimously revised their EPS estimates upwards for the current quarter, current year, and next year. For the current quarter, EPS estimates have trended upwards over the last 60 days. In that span of time, the consensus for the current quarter has improved, going from -$0.47 to -$0.41. Our EPS consensus estimate for the current year has moved up as well, going from -$2.16 to -$1.54 over the last 90 days. Sunrun reports its Q2 earnings results on the 11^th of August.

Yingli Green Energy Holding Company Limited- (NYSE:YGE)

Yingli Green Energy, also known as Yingli Solar, is a vertically integrated solar panel manufacturer with photovoltaic products in China. The company’s manufacturing process covers ingot casting and wafering through solar cell production and solar panel assembly. The company has over 30 regional subsidiaries and its solar panels have provided 15 gigawatts (GW) in total installed capacity for customers worldwide. Like Sunrun, YGE is a Zacks Rank #1 (Strong Buy). The stock has a beta of 2.91, so expect more price volatility from an investment in this company. The company is highly leveraged, so unless it proves itself capable of making a profitable turnaround in the long run, you should definitely make an investment in this company with the hopes of realizing profits in the short term.

Shares are trading for around $4, so compared to its four year share price high of about $80, YGE shares are trading at a significant discount. Yingli Solar has seen its EPS outlook improve significantly over the last few months. Three months ago, our earnings estimate predicted EPS of -$2.00 for the current quarter. The estimate has updated since then, and it now forecasts an earnings loss of -$0.30 per share. The current year estimate has also seen a large change over the last three months, going from -$8.28 to -$1.71. Yingli posted a significant beat on our EPS consensus last quarter, reporting EPS of $0.60 after subtracting nonrecurring items versus our estimate of -$0.97. This represents a beat of 161.86%, so hopefully the company can carry the optimistic EPS momentum going into its Q2 earnings report, which is scheduled to be released on the 23^rd of August.

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