SolarEdge market cap up $1b in past week

Guy Sella

SolarEdge's share price has picked up 36.7% since the results were published, and now stands at $88.17, putting its market cap at $4.23 billion, compared with $3.06 billion a week ago.

The market cap of Herzliya-based SolarEdge Technologies Inc. (Nasdaq: SEDG) rose by over $1 billion over the last week. The company's good financial results and strong guidance for the next quarter, published exactly a week ago, gave wings to its share price.

After soaring 25% on the day following the publication of SolarEdge's results, its share price continued its northward journey on the ensuing trading days, including a 5.2% jump yesterday and another 1.7% so far today. SolarEdge's share price has picked up 36.7% since the results were published, and now stands at $88.17, putting its market cap at $4.23 billion, compared with $3.06 billion a week ago.

SolarEdge develops and supplies systems for optimizing and monitoring solar energy. Over the past year, the company has expanded its activity through acquisitions in non-solar energy fields. SolarEdge held its Nasdaq IPO in 2015 at $18 a share. After rising in the first two months following the IPO, the trend in the share reversed, with the price falling to a low of $12.30 in late 2016. SolarEdge's share has since recovered, with a 147% return this year and a 381% return since the IPO.

The principal beneficiaries of the steep rise in SolarEdge's market cap are three investment institutions and the company's senior executives, headed by cofounder, chairman, and CEO Guy Sella, 54. According to the most recent report in April, Sella holds 1.3 million SolarEdge shares, 2.7% of the company's share capital, with a current value of $112 million. Sella, a veteran of the IDF Intelligence Corps' technology unit, founded SolarEdge with partners in 2006, after having been a partner in the Star Ventures venture capital fund. The cost of his salary in 2018 was $4.2 million, $2.8 million of which was stock-based compensation.

Third quarter guidance a pleasant surprise

Other SolarEdge executives and directors also holds shares in the company, with values ranging from $2 million to $50 million: CFO Ronen Faier, VP global sales Zvi Lando, cofounder and VP R&D Yoav Galin, and VP general counsel and corporate secretary Rachel Prishkolnik. Check Point CFO Tal Payne, who has been a director in SolarEdge since 2015, owns SolarEdge shares with a current value of $2 million.

The investment institution with the largest holding in SolarEdge is BlackRock, with 10% of the shares having a current market value of $412 million. BlackRock, which became a party at interest in the company in late 2017, has been increasing its stake ever since. Another investment institution with holdings in SolarEdge is NN Group, a large Dutch financial company with 7.8% of SolarEdge's shares according to the most recent report, currently worth $312 million. One Israeli institution is also among the beneficiaries of the surge in SolarEdge's share: Menorah Mivtachim, which held a 6.3% stake in the company as of April, currently worth $258 million.

The spark for the positive momentum in SolarEdge's share was its second quarter reports, in which the company outperformed the analysts' forecasts, with 43% growth in revenue to $325 million, a $32.9 million GAAP net profit, and a $49.3 million non-GAAP net profit. The difference between the latter two figures results mainly from reporting of $11.4 million in share-based compensation for employees, up from $9.7 million in the second quarter of 2018, due to the rise in the share price.

Another factor in the gap between GAAP and non-GAAP net profit is write-downs of intangible assets relating to the company's acquisitions. Over the past 15 months, SolarEdge paid $105 million to acquire a controlling interest in South Korean company Kokam, through which it entered the market for production of batteries and energy storage solutions; $140 million for a controlling interest in Italian company SMRE, which provides solutions for the electric car industry; and $41 million for the activity of Israeli company Gamatronic, through which it entered the uninterruptible power systems (UPS) market.

When SolarEdge reported its second quarter results, Sella said that his company's acquisitions were making going well, and that the company anticipated growth in each of its new product lines. The company's guidance for the third quarter, which was better than the market expected, cited $395-410 million in revenue (the analysts forecast $324 million), including $20 million from the non-solar energy market.

In response to the reports, Oppenheimer raised its target price for the share from $66 to $78 (the share price has since exceeded this), with a "Market outperform" recommendation, writing, "We continue to believe that SolarEdge is taking market share in a large number of end-markets." Oppenheimer is nevertheless cautious about SolarEdge's non-solar energy activity, despite the company's progress in its gross profit on these activities.

Credit Suisse also raised its target price for the share - from $53 to $70. Credit Suisse retained its "Neutral" recommendation for the share, while writing that the demand was greater than expected, especially in Europe.

Published by Globes, Israel business news - en.globes.co.il - on August 13, 2019

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