On Tuesday, Deutsche Bank maintained a Hold rating on SolarEdge Technologies (NASDAQ:SEDG) with a steady price target of $25.00. The firm forecasted that the company will announce its third-quarter earnings for 2024 on October 30 after the market closes, followed by a conference call at 4:30 pm.
The price target is based on a 12 times projected 2026 earnings per share, with no change from the previous multiple, and is discounted back one year at an 11% rate.
SolarEdge is expected to face ongoing difficulties in Europe over the next quarters, potentially extending until mid-2025. This outlook is derived from recent demand trends. The upcoming third-quarter results are not anticipated to provide much relief to investors unless the company can convincingly demonstrate an ability to manage year-end operations with minimal under-shipments. The analyst does not expect this to be the case.
The company's management had previously indicated at the RE+ conference that while the issue of under-shipments in the United States should be resolved after the third quarter, it would take an additional two to three quarters for the situation in Europe to improve, which is projected to be around the second quarter of 2025.
Despite the challenges, there is a perspective that investor sentiment towards SolarEdge could turn more positive within the next six to nine months. This is in light of the company's year-to-date performance, which has seen a significant 75% decline compared to ENPH's 13% decrease and the S&P 500's 21% increase.
Deutsche Bank has slightly lowered its third-quarter 2024 earnings estimate for SolarEdge by 3%, reflecting a modest adjustment to its projections.
In other recent news, SolarEdge Technologies has been the subject of multiple analyst adjustments. Mizuho Securities lowered their price target for the company from $40 to $35 due to concerns over margin recovery and inventory levels, while maintaining an Outperform rating. Jefferies, on the other hand, downgraded the stock from Hold to Underperform, citing a subdued outlook in Europe and strong competition. The firm also reduced its price target to $17 from $27.
SolarEdge reported second-quarter revenues of approximately $265 million and has set a revenue target of $550 million for the second quarter of 2025. The company also expects to become cash flow positive in the same year. However, both Stifel and Truist Securities maintained their Hold ratings due to concerns about under-shipments in the European market.
Morgan Stanley maintained an Equalweight rating and set a $28 price target for SolarEdge, noting that the company expects stable revenue and adjusted gross margins through the second quarter of 2025. Meanwhile, Truist Securities adjusted their 2024 and 2025 revenue estimates for SolarEdge to $1.02 billion and $1.67 billion respectively.
SolarEdge's management structure has also undergone significant changes, with former CEO Zvi Lando stepping down and ex-CFO Ronen Faier stepping in as interim CEO. Ariel Porat, previously Senior VP of Finance, has assumed the CFO role.
InvestingPro Insights
Recent InvestingPro data and tips provide additional context to SolarEdge's current financial situation, aligning with Deutsche Bank's cautious outlook. The company's Market Cap stands at $1.3 billion, reflecting the significant stock price decline mentioned in the article. This is further emphasized by InvestingPro data showing a staggering 82.31% price decline over the past year.
Two relevant InvestingPro Tips highlight SolarEdge's challenges: "Quickly burning through cash" and "Suffers from weak gross profit margins." These tips corroborate the article's discussion of ongoing difficulties and the company's struggle to manage operations effectively. The gross profit margin of 7.82% for the last twelve months ending Q2 2024 underscores this concern.
Despite these challenges, an InvestingPro Tip notes that "Management has been aggressively buying back shares," which could signal confidence in the company's long-term prospects. This action might contribute to the potential positive sentiment shift mentioned in the article for the next six to nine months.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for SolarEdge, providing a deeper understanding of the company's financial health and market position.
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