Maxeon Solar Technologies Ltd: Bargain Green Energy Investment for the Long Term
MAXN Stock Looks Set to Rise
China and other regions of the world are facing an energy crunch that’s leading to a move back toward the use of coal. This is not good in terms of the global push for green energy sources such as solar, wind, and water. Significantly increasing the energy production from these sources can help alleviate the rise of dirty energy.
Solar power is a major part of the green energy push. Invesco Solar ETF (NYSEARCA:TAN), a broad measure of solar-related stocks, has advanced 21% since October 6.
A small green energy play with a strong risk/reward scenario is Maxeon Solar Technologies Ltd (NASDAQ:MAXN). The company manufactures solar products in conjunction with its former parent company, SunPower Corporation (NASDAQ:SPWR).
Maxeon stock debuted at $32.40 following its spinoff from SunPower, surging to $57.97 in February 2021 before collapsing to the sub-$20.00 level, where I see a compelling opportunity.
Revenues Set to Power Up
After its spinoff from SunPower Corporation, Maxeon Solar Technologies Ltd no longer earned revenues from sales in the U.S. and Canada. This resulted in its revenues declining by 29.5% in 2020.
|Fiscal Year||Revenue (Millions)||Growth|
(Source: “Maxeon Solar Technologies Ltd.” MarketWatch, last accessed October 22, 2021.)
Maxeon Solar Technologies Ltd is expected to report flat revenues of $837.0 million for this year, but ramp up its revenues by 51.3% to $1.3 billion in 2022. (Source: “Maxeon Solar Technologies, Ltd. (MAXN),” Yahoo! Finance, last accessed October 22, 2021.)
Even with its flat revenues, Maxeon trades at only one times its consensus 2021 revenue estimate and at an attractive 0.6 times its consensus 2022 revenue estimate.
Maxeon Solar Technologies Ltd has been negative as far as its earnings before interest, taxes, depreciation, and amortization (EBITDA) go.
|Fiscal Year||EBITDA (Millions)||Growth|
(Source: MarketWatch, op. cit.)
The company has also been negative in terms of generally accepted accounting principles (GAAP) income.
The plus is that its GAAP earnings-per-share (EPS) loss has narrowed in two straight years, and I expect the situation to improve as the company’s revenues move higher.
|Fiscal Year||GAAP Diluted EPS||Growth|
(Source: MarketWatch, op. cit.)
Maxeon Solar Technologies Ltd is expected to report a loss of $5.52 per diluted share this year and reduce the loss to $2.81 per diluted share in 2022. (Source: Yahoo! Finance, op. cit.)
Profitability may be around the corner in 2023 or 2024 as the company’s revenues increase and its cost management improves.
In the meantime, Maxeon has a solid balance sheet, which gives the company time to work on its operations. At the end of June, the company held $266.9 million in cash and $178.5 million in debt.
All that bodes well for the value of MAXN stock.
Institutional ownership of Maxeon stock is decent for a small company. About 155 institutions hold a 40% stake in Maxeon Solar Technologies Ltd. (Source: Yahoo! Finance, op. cit.)
While solar stocks have paused, I’m confident about their long-term potential, given the massive global green energy trend.
The valuation of MAXN stock is compelling at its current level. Playing Maxeon stock via small positions and adding shares on price weakness could return big long-term gains to traders.