SolarEdge Technologies (NASDAQ:SEDG) stock fell under $200 earlier today, sending fearful investors running for the exits. I believe the shares are a steal now, though, and I’m bullish on SEDG stock because SolarEdge should soon be able to overcome its own low expectations.
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Israeli company SolarEdge Technologies sells microinverters, power optimizers, monitoring systems, and other solar technology components. If you’re generally bullish on the global solar industry, SolarEdge is definitely a company to watch.
So, is it a bad sign for SolarEdge if the company’s shares lost over 18% of their value in a single day? Not necessarily, as SolarEdge actually served up an earnings beat along with forward guidance that should be easier to live up to.
A Big-Bank Buy Rating for SolarEdge
Sometimes, even top-tier analysts can issue stock price targets that don’t pan out. A prime example would be an analyst with Goldman Sachs (NYSE:GS), Brian Lee, who recently announced a Buy rating and a $414 price target for SEDG stock.
After today’s debacle, $414 in 12 months probably isn’t realistic for SolarEdge stock. Still, we can’t really fault the Goldman Sachs analyst for placing a high price objective on the stock prior to SolarEdge’s August 1 earnings release.
Actually, Brian Lee’s bullish argument might still make sense today. In particular, Lee cited SolarEdge’s “strong C&I backlog, continued strength in FX that provides some stability – if not a slight tailwind – to gross margin, and a generally stable pricing strategy.” These factors haven’t suddenly disappeared, so maybe Lee’s bull case still holds up to a certain extent.
Besides, SolarEdge conducts business in the U.S., where the Biden administration unabashedly embraces clean-energy initiatives. The Inflation Reduction Act should have positive ripple effects for years to come.
Hence, it still makes sense for Lee to identify SolarEdge as a prime beneficiary of pro-solar U.S. policy. The analyst will probably have to adjust his price target for SEDG stock at some point, but that’s another matter entirely.
SolarEdge Beats on EPS but Issues Soft Guidance
All of this begs the question of what could possibly cause SolarEdge stock to drop below $200. Certainly, the market couldn’t have objected to SolarEdge’s earnings data for its second quarter of Fiscal Year 2023.
Starting with the top-line results, SolarEdge reported revenue of $991.29 million, which missed the analyst consensus estimate by $4.6 million but also demonstrated 36.2% year-over-year growth. All in all, I’d call that result a winner.
Next, SolarEdge announced quarterly EPS of $2.79, beating Wall Street’s call for EPS of $2.53. Again, there’s nothing objectionable here. If anything, financial traders ought to celebrate SolarEdge’s bottom-line earnings result.
Yet, there was no celebration for SolarEdge after the company’s quarterly results were released. That’s because there’s another closely-watched component to quarterly financial press releases — forward guidance.
For the company’s current fiscal quarter, analysts called for SolarEdge to generate $1.053 billion in sales. In contrast, SolarEdge’s management guided for $880 million to $920 million in sales.
What would explain the downbeat outlook? SolarEdge CEO Zvi Lando was quoted as saying, “The U.S. residential solar market is currently seeing some headwinds primarily related to higher interest rates.” Another factor might be a supply-demand imbalance, as Susquehanna analysts cited a buildup in SolarEdge’s product inventory.
If there’s any silver lining here, it’s that analysts and investors are now both aware of SolarEdge’s challenges as well as the company’s soft sales guidance. Now, SolarEdge has the task of meeting or exceeding this guidance, which shouldn’t be an impossible bar to clear.
Is SEDG Stock a Buy, According to Analysts?
On TipRanks, SEDG is a Strong Buy based on 14 Buys and two Hold ratings. The average SolarEdge Technologies stock price target is $336.60, implying 72.2% upside potential (though these stats are likely to change in the near future, so check back soon).
If you’re wondering which analyst you should follow if you want to buy and sell SEDG stock, the most accurate analyst covering the stock (on a one-year timeframe) is Joseph Osha of Guggenheim, with an average return of 93.95% per rating and a 73% success rate. Click on the image below to learn more.
Conclusion: Should You Consider SEDG Stock?
Low expectations can present opportunities in the financial markets. After a painful drop-off, SolarEdge stock now stands at its lowest price point of 2023.
That’s unfortunate if you already invested in SolarEdge (or if you happen to be an analyst who issued a price target above $400). The story of SolarEdge isn’t finished, though — not even close.
Remember, SolarEdge can still benefit from government support of clean-energy initiatives, and the company now has a sales goal that it can meet. So, I definitely see a contrarian opportunity with SEDG stock and feel that it’s worth considering now
