Solar installer SunPower is set to benefit from macro and micro tailwinds that will push the stock higher, Evercore ISI said Wednesday as it initiated coverage on the company with an outperform rating. Analysts led by Sean Morgan said in a report titled "Solar Winds of Change" that SunPower has been overlooked by investors in recent years as the company reorganized and divested assets, meaning it now trades at a discount relative to peers. "However, we believe investors are presently overlooking both industry and company specific long-term catalysts that will eventually help close the valuation gap," Morgan wrote in a note to clients. On the macro front, he pointed to six key factors that will benefit SunPower: the speed of solar adoption; a long-term trend of falling equipment costs; solar ownership costs declining, more electric vehicles; increasing concerns over grid reliability; and improving debt market acceptance of solar loan financing. When it comes to the company specifically, Morgan said SunPower has a strong balance sheet and ample cash liquidity, meaning it can pursue high-margin growth opportunities around residential solar, storage, EV charging and home energy software. "As the company's shift to target these industry tailwinds unfolds, leading to material top- and bottom-line growth, we believe the shares will rally," he said. Morgan also pointed to the California-based company's growing commercial and industrial solutions business segments. "We project both EBITDA and continuing EPS to inflect higher as topline growth and gross margin improvement help scale operating costs and drive improved profitability," he said. SunPower's stock is down about 14% for 2021 amid a downturn in solar names and renewable energy stocks broadly. Still, over the last year shares are up 115%. Evercore ISI has a $27 target on shares of SunPower, which is 28% above where the stock closed on Tuesday. The 52-week high level is $57.52 from Jan. 29, and the stock is about 63% below that level. Shares of SunPower were up 5.3% in early afternoon trading. - CNBC's Michael Bloom contributed reporting.
Construction workers install SunPower tiles on homes in San Ramon, Calif.
Robert Nickelsberg | Getty Images
Solar installer SunPower is set to benefit from macro and micro tailwinds that will push the stock higher, Evercore ISI said Wednesday as it initiated coverage on the company with an outperform rating.