On Friday, Mizuho Securities adjusted its outlook on SolarEdge Technologies (NASDAQ:SEDG) shares, a company specializing in solar inverters and energy storage. The firm reduced the price target to $84 from the previous $104, while maintaining a "Buy" rating on the stock.
The revision comes in response to SolarEdge's second-quarter revenues, which fell short of expectations due to decreased end-market demand.
Additionally, the company reported a slower pace in reducing channel inventory than anticipated. These factors, combined with a miss on gross margin percentages for the first half of the year, prompted the adjustment of the price target.
SolarEdge's management has been expediting shipments of lower-margin Samsung (KS:005930) cell storage during the first half of the year. This strategy is expected to pave the way for improved margins in the second half as the company begins incorporating new higher-margin cells into its offerings. Mizuho anticipates a gross margin recovery to around 28% in the fourth quarter.
Despite the reduction in gross margin estimates for 2024 and beyond, owing to a higher mix of battery products, Mizuho still projects an upswing in margins by the end of the year. The $20 decrease in the price target reflects the lower solar volumes and margins but is partially mitigated by a higher relative multiple in the valuation.
Mizuho has kept the present value of a 45X manufacturing tax credit constant in its price target calculation for SolarEdge, indicating that tax incentives continue to play a significant role in the firm's valuation model.
InvestingPro Insights
In light of Mizuho Securities' recent price target adjustment for SolarEdge Technologies (NASDAQ:SEDG), it's important to consider additional financial metrics and analyst insights provided by InvestingPro. Real-time data indicates a challenging landscape for SolarEdge, with a market capitalization of approximately $3.02 billion and a trailing twelve-month revenue showing a significant decline of 34.19%. This contraction in revenue is further emphasized by a sharp quarterly revenue drop of 78.35% as of Q1 2024.
InvestingPro Tips highlight several concerns for investors: analysts have collectively revised their earnings expectations downward for the upcoming period, and there is anticipation of a sales decline this year. Furthermore, SolarEdge's stock price has experienced considerable volatility, reflected in the 12.87% decrease over the last week and an even steeper 25.5% drop over the past month. However, it's worth noting that the company's liquid assets still outpace its short-term obligations, providing some financial stability amidst the turbulence.
For readers looking to delve deeper into the financial health and future prospects of SolarEdge, additional InvestingPro Tips are available, offering nuanced insights into the company's performance and stock valuation. There are 18 more tips available, which could be particularly useful for making informed investment decisions. To access these tips and make the most of the current market conditions, consider subscribing to InvestingPro using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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