SunPower Corporation (SPWRA) 11/19/09 PriceWatch Alert With $15.58 Break Even

Posted: Thursday, November 19, 2009 8:08 AM EDT
By: Market Intelligence Center Staff

SunPower Corporation (NasdaqNM: SPWRA) closed yesterday at $22.08. So far the stock has hit a 52-week low of $18.50 and 52-week high of $46.30. SunPower stock has been showing support around 21.55 and resistance in the 22.79 range. Technical indicators for the stock are Bearish and S&P gives SPWRA a weak 2 STAR (out of 5) sell rating. SPWRA appears on the Investors Observer Stocks In The News list. FBR Capital Markets downgraded SPWRA Tuesday to Market Perform from Outperform. Caris & Company also reduced SPWRA to Below Average from Above Average. Both downgrades came in reaction to news that the company is investigating possible accounting errors from the first three quarters of 2009. For a hedged play on this stock, look at a Jun '10 17.50 covered call (QRU FW) for a net debit in the $15.58 area. That is also the break even stock price for this trade. This covered call has a 212 day duration, provides 29.44% downside protection and a 12.32% assigned return rate for a 21.22% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the SPWRA Jan '11 10 Call (ZZR AB) and selling the Jun '10 17.50 call (QRU FW) for a $6.75 debit. The trade has a 212 day life and would provide 24.14% downside protection and an 11.11% assigned return rate for a 19.00% annualized return rate (for comparison purposes only). SunPower does not pay dividends at this time. [THA-Seven Summits Research]