The share price of solar energy technology company SolarEdge (Nasdaq: SEDG), which was at around $120 a year ago and at its peak three years ago was close to $370, is currently at just $19.5, giving the company a market cap of $1.1 billion (95% down from the peak). This follows a slight recovery from the low to which SolarEdge sank last month of under $18, a symbolic level, since that was the price at which the company made its IPO in 2015.
SolarEdge provides solutions to the solar energy industry designed to maximize output and minimize costs. At its peak, the company was valued at almost $20 billion, and it became the first Israeli company in the S&P 500 Index.
As though all this destruction of value were not enough, the company’s stock has become a short players’ favorite. According to investment website Seeking Alpha, it is in second place for the short position in its shares among the companies traded on the New York stock exchanges. The position amounts to 32.9% of its share capital.
A short sale is a way of deriving a gain from a share expected to fall in price. The trader borrows the stock, sells it on the market, and later buys it back in order to return it to the owner. If the trader has guessed right, he gains from the difference between the price at which he sells the stock and the lower price at which he subsequently buys it.
According to figures from Nasdaq, at the end of September, the short position in SolarEdge was 16.5 million shares, and the average daily volume of trading in the stock was 3.8 million shares, giving days to cover, i.e., the number of days required to close the short position, of 4.3.
Stock problems and weak guidance
SolarEdge has undergone many upsets in the past year. It began with a problem of stocks of its products that was revealed to investors last summer and that impacted the company’s financials: in the period of peak demand, the distributors working with SolarEdge bought large quantities from it, and when the situation changed and the rate of sales fell, they bought less from the company. SolarEdge estimates that this issue should be resolved in the first half of 2025.
Subsequently there came a profit warning and weak guidance for the future. The company was also demoted from the S&P 500 after two years, because of the fall in its share price, and it instituted two rounds of layoffs, in which it shed 1,300 employees, some 750 of them in Israel. A few months ago, the company’s veteran CFO Ronen Faier announced that he would leave the company, but two months later its CEO Zvi Lando made the surprise announcement that he would step down after five years in the post, and Faier was appointed interim CEO.
According to figures from "The Wall Street Journal", 34 analysts currently cover SolarEdge. 24 of them have neutral ratings, six are positive, and four are negative. Their average price target for the stock is $26.56, 36.5% above the current market price.
Published by Globes, Israel business news - en.globes.co.il - on October 14, 2024.
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