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Maxeon Solar Technologies (NASDAQ:MAXN) -8% in Monday’s trading as Bank of America downgraded the stock to Neutral from Buy with a $12 price target, saying it is grow increasingly bearish on reaching a resolution with SunPower (SPWR), margins across residential channels and end-market demand.
Maxeon (MAXN) was spun out of SunPower (SPWR) in 2019 and has been its exclusive panel supplier ever since, but disclosed in August that contract relationships had deteriorated with SunPower late on payments while alleging Maxeon had breached certain contract terms; no resolution has occurred, and Maxeon stopped shipments in July, which caused it to cut its Q3 outlook, which BofA’s Julien Dumoulin-Smith believes will materialize in a deeper cut to full-year guidance.
The analyst estimates the lack of SunPower (SPWR) shipments in Q3 is a $50M revenue hit for Maxeon (MAXN) and a parallel working capital tailwind for SunPower, which is seen having a clear incentive to extend negotiations while Maxeon is disadvantaged by the lack of revenue and facility underutilization.
On the positive side, DuMoulin-Smith noted Maxeon (MAXN) is in the second phase of three for a Department of Energy loan to finance one of very few cell-plus-module operations in the U.S. that will benefit from Inflation Reduction Act tax credits and likely can achieve advantaged pricing vs. imported modules.
