On Friday, Maxeon Solar Technologies Ltd. (NASDAQ:MAXN) shares received a downgrade from Morgan Stanley (NYSE:MS), with the firm's analyst shifting the rating from Equalweight to Underweight and setting a new price target of $4.00. The downgrade reflects concerns about competitive pressures, customer loss, and funding uncertainties.
Morgan Stanley's decision is driven by several factors impacting Maxeon Solar's market position and financial outlook. The firm cited intense competition in Europe from lower-cost suppliers and the loss of key customers in the U.S. residential solar market as significant challenges.
Moreover, there are doubts regarding the Department of Energy's funding for Maxeon Solar's U.S. manufacturing facility, which adds to the company's uncertain future.
The new price target of $4.00 is derived from a discounted cash flow analysis, which assumes a 12% compound annual growth rate in revenue through 2035 and a 10% terminal EBIT margin in the same year. The target is based on a discount rate of 13.1% and implies an enterprise value to 2026 sales multiple of 0.4x. According to Morgan Stanley's assessment, profitability for Maxeon Solar, in terms of adjusted EBITDA, is not anticipated until 2027.
Maxeon Solar's stock adjustment reflects Morgan Stanley's analysis of the company's financial health and market conditions. The firm's methodology incorporated various financial metrics and industry dynamics to arrive at the new rating and price target. This reassessment suggests that investors may need to recalibrate their expectations for the company's performance in the coming years.
In other recent news, Maxeon Solar Technologies has seen a series of significant developments. The company announced the appointment of George Guo, former CEO of TCL Communication Technology, as its new CEO. Guo, who succeeded Bill Mulligan on October 11, 2024, brings with him extensive experience in technology leadership and strategic growth.
In response to a potential delisting notice from Nasdaq, Maxeon Solar Technologies has initiated a reverse stock split strategy. This move aims to raise the bid price above Nasdaq's $1.00 per share minimum by consolidating every 100 existing issued ordinary shares into one. Concurrently, the company is undergoing a capital restructuring plan, which includes an equity investment from TZE and proposed debt restructuring.
Analysts have reacted to these developments with caution. Mizuho (NYSE:MFG) and Roth/MKM have maintained a neutral rating on Maxeon Solar, albeit with reduced price targets. Goldman Sachs, however, has downgraded the company's stock from Buy to Sell, citing a miss in gross margins and EBITDA in recent earnings reports.
These are the recent developments in Maxeon Solar's financial landscape, and investors are closely watching the company's future actions regarding the reverse stock split and compliance with Nasdaq's listing requirements.
InvestingPro Insights
Recent InvestingPro data and tips provide additional context to Morgan Stanley's downgrade of Maxeon Solar Technologies (NASDAQ:MAXN). The company's market capitalization stands at $162.97 million, reflecting its current valuation in light of recent challenges.
InvestingPro Tips highlight that Maxeon is "quickly burning through cash" and "operates with a significant debt burden," which aligns with Morgan Stanley's concerns about funding uncertainties. The company's financial health is further underscored by its negative gross profit margin of -3.26% in the last twelve months, supporting the InvestingPro Tip that Maxeon "suffers from weak gross profit margins."
Despite these challenges, Maxeon has shown a "significant return over the last week" with a 30.39% price increase, and a strong 86.08% return over the last month. However, this short-term performance contrasts sharply with the longer-term trend, as the stock has "fallen significantly over the last year" and "taken a big hit over the last six months," with a -95.51% six-month price return.
These insights complement Morgan Stanley's analysis and provide a broader picture of Maxeon's financial situation. For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Maxeon Solar Technologies.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.