SunPower Corporation (NASDAQ: SPWR) has the potential for better margin expansion, and there is greater visibility into the solar panel manufacturer's cash flow growth going forward, according to Morgan Stanley.

The SunPower Analyst: Stephen Byrd upgraded SunPower from Underweight to Equal-Weight and raised the price target from $5.30 to $10.50.

The SunPower Takeaways: Following the recent spin-off of its manufacturing unit, the restructured company has improved market opportunity and a stronger business model, with more potential for margin expansion and cash flow generation, Byrd said in the Friday upgrade note.

“We are increasing our 2021 EBITDA estimate from $77m to $116m to reflect a stronger rebound in growth into 2021, with revenue growing 31% YoY (+$150m vs. our prior estimates),” the analyst said.

The stock underperformed in 2020 until the spin-off on Aug. 27, he said. It has since outperformed by 20%, “keeping us from going OW as we think the market has better recognized the value of the pureplay installation business,” Byrd said.

SPWR Price Action: SunPower shares were rising 3.03% to $10.19 at last check Friday.

Photo courtesy of SunPower. 

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