SolarEdge Technologies (NASDAQ: SEDG) reported its quarterly earnings on November 7. FactSet analyst estimates provide an EPS consensus of $1.47, which SEDG missed by 38% with actual EPS of $0.91. However, FactSet analysts projected a sales consensus of $826.85m, which SolarEdge beat with actual sales of $836.72m.
This revenue beat, along with strong projected revenues in Q4 and improved European revenues, all paint a more optimistic future for SolarEdge shareholders.
SEDG stock is up over 1,000% since it went public in 2015. It really took off in 2020, but the SolarEdge share price has fluctuated wildly since 2021. Today SEDG is down 35% from its 52-week high but remains 32% above its 52-week low.
What Does SolarEdge Technologies Do?
SolarEdge is a $14bn solar stock and a global leader in smart energy technology. The company makes inverter systems for use in solar panels. SEDG uses its own SolarEdge solution, a DC-optimized inverter system that maximizes power generation at the individual PV module level while lowering the cost of energy produced by the solar PV system and providing comprehensive and advanced safety features. It also makes microinverters and traditional string inverter offerings.
SolarEdge began its commercial sales with a product offering of simplified inverters, power optimizers, and a cloud-based monitoring platform. As the solar energy industry has evolved, SolarEdge has developed innovative solutions to further enhance smart energy technology, including inverters that include compatibility with batteries for increased self-consumption and storage, inverters that allow EV charging, smart meters, smart energy devices (sockets, water heater controllers, wireless relay) and smart PV modules.
By leveraging world-class engineering capabilities and with a relentless focus on innovation, SolarEdge creates smart energy solutions that power our lives and drive future progress.
SolarEdge developed an intelligent inverter solution that changed the way power is harvested and managed in photovoltaic (PV) systems. The SolarEdge DC-optimized inverter seeks to maximize power generation while lowering the cost of energy produced by the PV system.
Continuing to advance smart energy, SolarEdge addresses a broad range of energy market segments through its PV, storage, EV charging, batteries, electric vehicle powertrains, and grid services solutions.
SolarEdge is headquartered in Israel, with subsidiaries all over the world.
Q3 Highlights
Record revenues: $836.7m
Record revenues (solar segment): $788.6m
GAAP gross margin: 26.5%
Non-GAAP gross margin: 27.3%
Gross margin (solar segment): 28.3%
Record GAAP operating profit: $84.4m
Record non-GAAP operating profit: $120.2m
GAAP net income: $24.7m
Non-GAAP net income: $54.1m
GAAP net diluted earnings per share (EPS): $0.43
Non-GAAP net diluted EPS: $0.91
Inverters shipped: 2.7 Gigawatts (AC)
Batteries shipped: 320.7 MWh
Zvi Lando, CEO of SolarEdge, said:
We are pleased with our third quarter results, setting new revenue and operating profit records. The results reflect extremely strong momentum in Europe where our revenues grew 90% compared to the same quarter last year,
This quarter we increased production and were able to ship more units while increasing our operational efficiency and returning to a growth trajectory for our gross margins.
Q4 Forward Guidance
Revenues: within the range of $855m to $885m
Non-GAAP gross margin: within the range of 27% to 30%
Non-GAAP operating profit: within the range of $115m to $135m
Revenues (solar segment): within the range of $810m to $840m
Gross margin (solar segment): within the range of 28% to 31%
SEDG Stock Financial Metrics
SEDG sales have been increasing Y/Y for several years, and the outlook for this to continue is likely.
Earnings before interest and tax (EBIT) fell in 2020 but are recovering and are expected to exceed 2019 levels this year. But profits are expected to be down Y/Y in 2022.
Over the past year, SEDG stock has traded between $190.15 and $389.71. Today it trades at around $251.73. Year-to-date, the SolarEdge Technologies Inc stock price is down -10.88%, while the S&P 500 is down -20.19% over the same period.
SEDG stock has a price-to-earnings ratio (P/E) of 98.18 and a forward P/E of 32. Its price-to-book-value (P/BV) is 6.89. These metrics suggest the stock may be overvalued at today’s price.
Analyst Ratings
FactSet analysts have a consensus Overweight rating on SEDG stock with a target share price of $336.38.
After SolarEdge Technologies released its latest earnings update, the following analysts made share price target adjustments:
Northland Securities upgraded SEDG stock to Market Perform from Underperform.
Needham adjusted its price target on SolarEdge Technologies to $370 from $380, maintaining a Buy rating.
BMO Capital adjusted its share price target on SEDG stock to $316 from $306, maintaining its Outperform rating.
Goldman Sachs adjusted its share price target on SolarEdge Technologies to $391 from $404, maintaining its Buy rating.
Oppenheimer lowered its SolarEdge share price target to $379 from $400, maintaining an Outperform rating.
UBS cut its SolarEdge Technologies share price target to $245 from $310, maintaining a Neutral rating.
Piper Sandler adjusts SolarEdge Technologies' price target to $325 from $315, keeping its Overweight rating.
B. Riley cut its SolarEdge share price target to $370 from $377, noting a higher expected tax rate; keeps Buy rating.
SolarEdge Growth Strategy
As part of SolarEdge's growth strategy, it has acquired companies that complement its offerings. This includes companies that have technologies that can leverage its expertise in power electronics and power optimization. By combining acquired resources with R&D, SolarEdge is expanding its activities into other essential areas such as e-Mobility, battery storage and energy storage systems.
The company is building a 2GW factory in South Korea.
Zvi Lando, SolarEdge CEO, said:
In South Korea, the ramp of our Sella 2 factory is on schedule, and we began mass production and are shipping cells to customers in small quantities this quarter. Our e-Mobility revenues are at a steady but reduced rate, much in line with the overall automotive industry supply chain-related instability.
Is SEDG Stock a Good Investment?
As the world transitions to renewable energy and a global energy crisis highlight the need to act sooner rather than later, solar stocks are edging back into the spotlight. But whether it’s enough to help solar stocks retrace previous highs after taking a beating over the past year remains to be seen.
SolarEdge serves customers in the United States, Europe, and elsewhere. This gives it diversification. However, SolarEdge is operating in a highly competitive arena. Along with Enphase Energy (NASDAQ: ENPH), SolarEdge Technologies has been considered a top ten US solar stock in recent years.
Furthermore, inflationary pressures are weighing on company margins, and the company continues to face supply chain difficulties. Plus, SEDG stock is potentially overvalued at its current share price, making it a speculative investment.
We believe that the continued increase in manufacturing capacity in our existing manufacturing lines combined with our plans to establish a manufacturing footprint in the U.S. will allow us to capitalize on the strong demand we are experiencing globally.