Despite SunPower Corp. (NASDAQ:$SPWR) beating consensus, investors remain skeptical on the company’s profitability.

Specifically, SunPower posted strong Q3 results due to earlier-than-expected completion of several projects. When it comes to project companies, however, this type of beat may not be as meaningful as it is an indicator of the company’s strength.

SunPower reports its non-GAAP gross margins as follows: Power Plant- 4.5%; Commercial -16.2%; Residential -21.5%.

These numbers, especially the Power Plant business growth margins, are abysmal. With power Plants being a  big part of SunPower business, this business drags down the overall GMs to 12.8%.

Residential gross margins, while looking decent, are misleading due to the opex and SG&A requirements of the residential business are much higher than that of a utility-scale business.

Looking ahead, the Company’s prospects are largely dependent on the Suniva Section 201 tariff decision. The company, in the Q3 conference call, announced that it is working with ITC and the administration to get a favorable disposition. What this means is, the stock has a high chance of trading down to due to the Suniva tariff uncertainty.

Featured Image: twitter