The negative momentum of Israeli solar energy company SolarEdge Technologies (Nasdaq: SEDG) continues. The company's share price was down another 5.4% at the start of Wall Street trading after Barclays cut its recommendation. Since the start of 2023, SolarEdge has lost almost 60% of its value and the share price is down 67% from its peak in November 2021.
The stock has given up all the gains of the last few years and returned to the price at which it was traded in May 2020. SolarEdge's market cap on Nasdaq is currently $7.3 billion, and it is the eighth most valuable Israeli company on Wall Street, after being the most valuable Israeli company for a period.
SolarEdge, which develops and markets solar inverters for photovoltaic arrays and other energy generation and storage products, is managed by CEO Zvi Lando.
Yesterday, Barclays downgraded SolarEdge's recommendation to Equal Weight from Overweight, while the price target was cut to $152 from $275. Nevertheless the price target is still 24% above SolarEdge's current share price on Nasdaq.
According to data published by "The Wall Street Journal" the average price target for SolarEdge is $269, more than double the share's current price of $122.56. While a month ago 28 institutions gave the company a positive recommendation, seven were neutral and one negative, today 25 give positive recommendations, eight give neutral recommendations, and there is still only one negative recommendation.
Barclays cut its recommendation because it identifies challenges beyond the short term, among other things because of falls in average prices for products, loss of market share and negative foreign exchange volatility influences.
Barclays analysts note that although SolarEdge increased market share at the start of 2023, it has since lost market share. Barclays adds that despite de-stocking, next year still seems challenging and will include a loss of market share and falling prices.
SolarEdge fell sharply in August after publishing its financial results for the second quarter of 2023. It also published revenue guidance of $880-920 million for the third quarter, below second quarter revenue and 5%-10% higher than the corresponding quarter in 2022. SolarEdge explained that stocks had accumulated with customers, mainly in Europe but also in the US, and added that the fourth quarter, which is usually seasonally weak, will be similar or slightly better than the third quarter.
Oppenheimer sees long-range opportunity
After the falls in August, Oppenheimer Israel analysts met with SolarEdge CFO Ronen Faier, and estimated that despite the short-term risks, the temporary weakness in the stock represents a long-term opportunity.
Oppenheimer noted that the share price is similar to its pre-Covid pandemic price despite an improvement in the company's results since then. Oppenheimer said, "The latest decline comes amid investor concerns about a slowdown in the growth rate at the end of the year and in 2024, due to an increase in stocks in the market. This is a result of the combination of high interest rates, the drop in electricity prices from 2022 peaks, stricter regulation in the US and recently due to the increase in the supply of solar panels from China, leading to a sharp drop in panel prices by about 50%."
However, Oppenheimer mentioned that the US market, which is in a difficult situation, is only responsible for 20% of the company's revenue, and in Europe SolarEdge sees continued growth of 30%-40% in 2024.
"Even assuming a slowdown in demand, we believe that the company will be able to maintain its rate of cash generation and even improve it," Oppenheimer writes, estimating that SolarEdge will be well positioned for a recovery in the solar energy market.
Published by Globes, Israel business news - en.globes.co.il - on October 3, 2023.
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