Maxeon Solar has become a penny stock: a bargain or value trap?

Maxeon Solar Technologies (NASDADQ: MAXN) stock price has been on a freefall this year as bankruptcy risks remained. It has plummeted by 96.70% this year and by over 99% in the past 12 months. A company that had a market cap of over $1.8 billion in November last year has plummeted to $13.23 million today.

Why Maxeon Solar is collapsing

Solar energy stocks have struggled in the past few months as demand for solar panels slowed amid high interest rate environment. Sunnova shares have crashed by over 63% in the past 12 months while Enphase Energy, Sunrun, and SolarEdge have dropped by 34%, 10%, and 88%, respectively. 

Maxeon Solar, a company that manufactures solar panels has been the worst performer in the solar energy industry. The company, which was spun out of SunPower in 2020, has sold off after SunPower ended its exclusive distribution agreement. 

As a result, SunPower can now buy its solar panels from other companies, especially Chinese ones that manufacture and sells them for a cheaper price. Maxeon, on the other hand, can now sell its panels to non-SunPower installers in the US.

These moves have had a negative impact on Maxeon Solar. In its most recent results, the company said that its total megawatts produced dropped to 488 from 653 MW in the fourth quarter and 774 MW in the same period in 2023. 

Maxeon Solar’s revenue dropped to over $187 million in the last quarter from $229 million in the fourth quarter. These are substantially low numbers since the company made over $318 million in the same period in 2023. Most of these revenues came from the United States followed by EMEA and APAC. 

Weak Maxeon Solar guidance

At the same time, the company expects that its business will remain under pressure this year. It expects that its shipments will be between 520 and 600 MW and its revenue will be between $160 million and $200 million. 

For the year, the company’s adjusted EBITDA will be a loss of between $160 million and $110 million. These are significantly weak results considering that its revenue stood at $1.12 billion in 2023 while its EBITDA was over $88 million last year. 

Therefore, there are concerns that Maxeon Solar could go bankrupt as the industry faces substantial challenges. Its cash and short-term investments from $278 million in Q1’23 to $98.4 million in the last quarter.

It has worked to boost its balance sheet and avoid bankruptcy. It extended $207 million convertible notes maturing in 2027 by 2 years. It also raised $97.5 million convertible notes maturing in 2029. Also, TZE invested $100 million in the company, taking a 50.1% stake. 

Maxeon Solar’s business has now attracted a bunch of shareholder lawsuits. These law firms allege that Maxeon relied on exclusive sales to SunPower, which it failed to disclose. They hope to generate a huge sum of money, which will be channeled to investors.

Maxeon Solar stock price forecast

MAXN chart by TradingView

The daily chart shows that the MAXN share price has been in a strong freefall in the past few months. Most recently, this drop has happened in a high-volume environment. 

The stock has remained below the 50-day moving average, meaning that bears have prevailed. Also, the Relative Strength Index (RSI) and the Stochastic Oscillator have moved below the oversold level.

Therefore, the stock will likely continue falling in the coming days as demand for the stock wanes. However, since this is a heavily shorted company, it could go through a short squeeze as we saw with companies like AMC and GameStop in May. If this happens, it could rise to $0.60.