On Tuesday, Jefferies issued a downgrade for SolarEdge Technologies (NASDAQ:SEDG) stock, moving its rating from Hold to Underperform and reducing the price target to $17.00 from the previous $27.00. The firm highlighted a longer-than-anticipated subdued outlook in Europe and strong competition, despite a recovering U.S. market.
The downgrade comes after discussions at the recent RE+ event, which did not provide the expected confidence in the company's prospects. Jefferies now projects average selling prices (ASPs) to be significantly lower than the market consensus for the years 2025 and 2026, with a year-over-year decrease of 14%. The consensus estimates had predicted ASPs to decrease in the low single digits percentage range.
The firm pointed out that SolarEdge's products carry a heavy premium compared to their Chinese counterparts in the European market, which could lead to sharper declines in ASPs, potentially exceeding 10%. While there might be some positive impact on U.S. ASPs due to domestic content, Jefferies anticipates this will be mostly negated by other factors.
In the second quarter, Europe accounted for 37% of SolarEdge's solar sales, a decrease from 64% in 2023. Jefferies expects the European proportion to trend towards approximately 30% but still remain a significant portion of the business.
In other recent news, SolarEdge Technologies has been under the microscope of various other financial analysts due to significant changes in its management structure and revised financial projections. Amid concerns about under-shipments in the European market, Stifel and Truist Securities have maintained their Hold ratings on SolarEdge, with a steady price target of $20.00. Despite these challenges in Europe, the company is predicted to perform better in the U.S. market due to its notable market share in the third-party ownership sector.
SolarEdge has reported second-quarter revenues of approximately $265 million, with plans for new product launches in early 2025. The company has set a revenue target of $550 million for the second quarter of 2025 and expects to become cash flow positive in the same year.
CEO Zvi Lando has stepped down, with former CFO Ronen Faier stepping in as interim CEO, and Ariel Porat, previously Senior VP of Finance, has assumed the CFO role. Analysts from Morgan Stanley, Jefferies, Canaccord Genuity, and BMO Capital have maintained their respective ratings, with Morgan Stanley setting a $28 price target and Jefferies a $27 target. Notably, Deutsche Bank reduced its price target from $40 to $25. These developments are part of SolarEdge's ongoing strategy to navigate a complex market environment and meet increasing demand.
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