Stocks of Maxeon Solar Technologies Ltd (MAXN), a global leader in solar innovation, plunged 31% week-over-week on signs demand for rooftop solar panels is weakening.
Though Maxeon outperformed analysts' predictions of a $0.08 loss per diluted share for its fiscal Q2 2023 report ending July 2nd, with a smaller loss of only $0.03 per share, the company's sales failed to meet expectations, with a revenue of $348.4 million significantly below a projection of $372.6 million.
Maxeon’s Chief Executive Bill Mulligan said that ”the demand environment in the global distributed generation* (DG) market weakened significantly in late-Q2 due to the combined effect of higher interest rates, the impact of policy disruption in California, and high levels of industry-wide channel inventory in both the U.S. and Europe,” resulting in lower-than-expected solar shipments and revenue.
Bill Mulligan added that “these challenging market conditions are expected to persist at least through Q3, particularly in residential.” That’s why Maxeon has increased its sales focus on the commercial and industrial (C&I) segment. The company therefore expects “a somewhat higher mix of C&I sales over the next few quarters with some push-out of volume from Q3 to Q4 and into 2024 due to the longer sales cycles associated with C&I projects.”
Moreover, Maxeon plans to invest $1.2 billion to establish the largest polysilicon solar panel factory in the US, a move energized by President Joe Biden's landmark climate bill that fosters domestic clean-energy production. The Albuquerque, New Mexico-based plant's construction is scheduled to commence in Q1 2024, banking on successful financial closure under the US Department of Energy, with operations kicking off in 2025. Producing up to 3 gigawatts of solar cells and panels annually, the facility will effectively double Maxeon's manufacturing capacity.
This development is one of the many projects resulting from Biden’s Inflation Reduction Act which offers significant incentives to enhance domestic manufacturing. It has spurred developers and suppliers to commit over $270 billion in the past year - more than the aggregate total of the preceding eight years, as per the American Clean Power Association.
In light of Bill Mulligan’s comments, we can however wonder whether the global demand can match Maxeon’s future solar panel supply capabilities.
The strategic move might alleviate some of Maxeon's issues, but it won't completely eliminate them. The company's sales in Q3 are projected to drop to a range of only $280 million to $320 million - a far cry from Wall Street's estimate of $395 million – and as a result, gross profits are likely to fall short of operating costs.
This gloomy outlook weighs on the clean energy industry. The alternative energy and solar energy themes were down 2.43% and 1.74% respectively over the week ended on August 11th. Both themes saw weekly outflows of $111 million and $31 million (outflows of 1,676 million and 316 million for the year.)
* Solar panels are examples of distributed generation technologies that produce electricity at or near the point of usage.
Group Data: Solar Energy, Alternative Energy
