On Thursday, Mizuho Securities adjusted its outlook on SolarEdge Technologies (NASDAQ:SEDG), a provider of solar power optimization and photovoltaic monitoring solutions. The firm lowered the price target on the company's shares to $35.00 from the previous $40.00 while maintaining an Outperform rating.
The revision of the price target reflects concerns over a slower pace of gross margin recovery and a reduced EBITDA multiple, which now sits at a 2-turn discount compared to the company's peers, excluding Enphase Energy (NASDAQ:ENPH).
Despite the reduction, Mizuho acknowledges the potential for working capital gains in 2025 due to SolarEdge's current inventory levels, but also anticipates a potential 15% inventory write-off charge, estimated to impact the stock by approximately $3 per share.
Mizuho reiterated its Outperform rating for SolarEdge, citing several factors that could positively influence the company's performance. These include expected revenue growth and margin improvements after the resolution of channel destocking issues.
The firm's revenue target remains conservative, factoring in flat demand projections for Europe in the second quarter and weak battery gross margins. Additionally, Mizuho anticipates positive free cash flow for SolarEdge in the second quarter of 2025.
The outlook for SolarEdge also hinges on the strategic direction set by the new CEO, whose appointment is yet to provide clarity on the future course of the company. Mizuho's stance suggests a belief in the stock's potential to benefit from the aforementioned factors despite the near-term challenges facing the company.
In other recent news, SolarEdge Technologies has seen a flurry of activity. The company reported second-quarter revenues of approximately $265 million and has set a revenue target of $550 million for the second quarter of 2025.
SolarEdge anticipates becoming cash flow positive in the same year. Amid these financial projections, Jefferies downgraded the company's stock from Hold to Underperform, citing a subdued outlook in Europe and strong competition. The firm also reduced its price target to $17.00 from $27.00.
SolarEdge is facing challenges in the European market, with both Stifel and Truist Securities maintaining their Hold ratings due to concerns about under-shipments. However, both firms predict SolarEdge to perform better in the U.S. market due to its significant market share in the third-party ownership sector.
The company'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.
Morgan Stanley maintained an Equalweight rating and set a $28.00 price target for SolarEdge, noting that the company expects stable revenue and adjusted gross margins through the second quarter of 2025. Meanwhile, Jefferies initiated coverage with a Hold rating and a $27.00 price target, citing the company's opaque future and continuous negative free cash flow.
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