(Sunpower story updated for Auriga downgrade, share slump)

NEW YORK ( TheStreet) -- It was the best of times and the worst of times for SunPower ( SPWRA) shares on Monday and Tuesday.

On Monday, SunPower shares surged by more than 8.8% after the U.S. solar company announced more 711 megawatts in projects sold to Southern California Edison, but projects years-out in terms of development and earnings impact.

Then late on Monday, Auriga Securities downgraded SunPower to a sell and SunPower shares proceeded to give back half of Monday's gains, down between 3% and 4.5%, and reaching their average daily volume of shares before the midday mark on Tuesday.

SunPower has been one of the most beaten-down stocks among the solar group, and therefore, any catalyst for the group as a whole that indicates a stronger 2011 than the bears would allow helps SunPower to rise from its 42% decline over the past year. That rally point for solar occurred on Monday, when LDK Solar ( LDK) upped its 2011 guidance, leading to big gains for many stocks in the solar sector.

It was a tale of two very different solar tapes in the announcements from SunPower and LDK then -- LDK is also up 50% over the past year in contrast to SunPower's big decline -- yet both, in their own way, circle back around to the issue of cost and pricing in the solar market.

SunPower had the largest loss on Tuesday among solar stocks that had rallied on the previous day.

For SunPower, the power purchase agreements may be signed today, but they remain predicated on continued cost reductions from the high-cost module maker that will make the project economics work by 2014.

"SunPower is pricing these projects with a forward pricing curve that it has yet to achieve in its manufacturing process, and that's the big unknown," says Mark Bachman, analyst with Auriga Securities. "If SunPower can achieve the pricing model that they are forecasting, then the projects work," the analyst adds.

In fact, in the Auriga downgrade of SunPower to a sell late on Monday, the analyst argued that the cost reduction roadmap that SunPower has put in place will allow it to reach a competitive level by 2014, but that will be two years after the low-cost Chinese leaders reach a similar cost point.

Recently, solar thermal project developer Tessera Solar was forced to sell a project it had been developing with Southern California Edison. The cost of solar thermal relative to the cost of photovoltaic technology was reportedly a major issue for Tessera, as the cost of photovoltaics has come down precipitously over the past few years. The Tessera sale showed that even projects under a power purchase agreement are far from a done deal for solar developers.

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