The solar energy sector is facing headwinds, and SolarEdge Technologies Inc (SEDG) is feeling the brunt of it. The company’s shares have plunged over 80% year-to-date, raising concerns among investors. This sharp decline is largely attributed to weakening demand in the European solar market, a key region for SolarEdge.
JPMorgan analyst Mark Strouse, while maintaining an Overweight rating on SolarEdge, has lowered the price target from $35 to $29. His decision stems from the recent third-quarter results of Enphase Energy Inc (ENPH), a major player in the solar energy space. Enphase’s report revealed a significant 34% sequential decline in European sell-through during the third quarter. Strouse highlights this as a sign of ongoing challenges in the European market.
Although not a direct competitor to Enphase, SolarEdge has a substantial presence in Europe, with around 60% to 65% of its sales originating from the region. Consequently, the weak demand trends observed in Enphase’s report have raised concerns about SolarEdge’s prospects.
Strouse’s analysis has led him to adjust his earnings estimates for SolarEdge’s third quarter. He now predicts a loss of 38 cents per share, a significant revision from his previous estimate of 12 cents per share. Furthermore, Strouse cautions that SolarEdge could face a cash burn of approximately $173 million between the third quarter of 2024 and the first quarter of 2025.
These concerns about SolarEdge’s liquidity are expected to linger until there is greater clarity regarding the company’s cash generation capabilities. Investors will be closely watching SolarEdge’s upcoming third-quarter earnings report, scheduled for November 6, for insights into the company’s performance and future outlook.
The news has had a noticeable impact on SEDG stock, with shares declining by 13.14% to $15.27 at the time of publication on Wednesday. This significant drop underscores the market’s reaction to the concerns surrounding SolarEdge’s future growth prospects.