Why SunPower Corporation Stock Soared 15%

What happened

Worries that Trump Administration's tariffs on solar panels manufactured abroad would hurt American solar companies have weighed on SunPower (NASDAQ: SPWR) stock this year. From a high near $10, SunPower had fallen by as much as one-third through the close of trading yesterday.

But that was yesterday. Today, SunPower stock is soaring -- up 15% as of 1:20 p.m. EDT on Tuesday after a company statement confirming that SunPower has won exemption from the tariffs on its solar panels.

So what

As Reuters reports, SunPower produces most of its solar cells and modules in Mexico and the Philippines -- not China, the focus of the trade war -- before importing them into the U.S. for installation as solar panels. What's more, SunPower management has been arguing to the U.S. Trade Representative (USTR) that its products are of higher quality than "cheap, commoditized imports" from China.

Today, that argument won out, and SunPower confirmed that on Wednesday, the USTR will announce that "SunPower's highly differentiated IBC cells and modules are excluded from tariffs" of up to 30%.

Now what

By being able to sell its solar panels for 30% less than what rival importers must charge, SunPower will gain a great advantage. And by creating a lot of padding between the prices SunPower can charge, and the prices rivals now must charge, it could give SunPower room to charge more for its panels going forward -- creating the potential for fatter profit margins.

Greater sales potential, and greater margin potential as well? No wonder investors are pleased.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.