Shares of SolarEdge Technologies (NASDAQ: SEDG) and several other solar stocks fell sharply last week when NextEra Energy’s (NEE) CEO John Ketchum stated that the U.S. Department of Commerce’s probe into Chinese solar-panel suppliers could delay a huge portion of its solar and storage projects to 2023. The U.S. authority is investigating whether Chinese suppliers are evading tariffs.
Overall, SolarEdge shares are down 12.8% year-to-date.
Israel-based SolarEdge provides inverter solutions and power optimizers for the photovoltaic industry and is one of the leading players in the residential solar inverter market.
The company is set to announce its first-quarter results after the market closes on May 2.
SolarEdge’s Q421 revenue grew 54% to about $552 million and surpassed analysts’ expectations of $549.35 million, thanks to robust demand for its products. Adjusted EPS grew 12.2% to $1.10 but lagged the Street’s estimate of $1.31. The company’s profitability was impacted by higher manufacturing costs and costs associated with its efforts to ramp up production to address the surge in demand.
Will Sales Momentum Continue?
Wall Street expects SolarEdge’s revenue to grow nearly 57% to $635.5 million in Q122, reflecting continued demand. Meanwhile, the company forecast Q122 revenue between $615 million-$645 million. Analysts expect Q122 adjusted EPS to grow about 31% to $1.28.
SolarEdge expects its margins in the first half of the year to be impacted by component constraints, the rapid expansion of manufacturing capacity, logistics constraints, and higher shipment charges.
Wall Street’s Take
Recently, Stephens analyst Cameron Lochridge initiated coverage on SolarEdge with a price target of $490 as he sees “significant tailwinds gathering for the business ahead.”
For the company’s solar business, besides continued residential market growth, Lochridge sees rising momentum for commercial solutions and higher utility use cases following the launch of its 330 kW solution later this year.
The analyst also expects “the most meaningful upside ahead” in SolarEdge’s residential storage business and anticipates shipments to grow significantly through at least 2025, driven by “growing attachment rates and market share capture.”
Meanwhile, the Street is cautiously optimistic on SolarEdge, with a Moderate Buy consensus rating based on 12 Buys, four Holds, and one Sell. The average SolarEdge price target of $359.59 implies 46.92% upside potential from current levels.
Conclusion
SolarEdge is expected to benefit from solid demand stemming from the growing focus on sustainability and increasing use of renewable energy sources. However, the impact of the ongoing probe into potential tariff evasion by Chinese solar panel suppliers might impact shares of SolarEdge and other solar companies. SolarEdge’s management might shed some light on this matter in the upcoming earnings call.
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