SolarEdge Technologies (SEDG) stock gained about 9% on Wednesday after it announced that it would close its energy storage division, resulting in the layoff of about 500 employees. This decision is aimed at cutting costs and increasing the company’s focus on its core businesses, such as solar and energy management solutions.
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As part of the restructuring, SolarEdge intends to sell assets related to its energy storage division, including battery cell manufacturing facilities. The job cuts, which represent about 12% of the company’s workforce, are scheduled to occur in the first half of 2025, primarily affecting manufacturing jobs in South Korea.
Significantly, the closure of this division is expected to save around $7.5 million in quarterly operating expenses.
SolarEdge’s Performance Hit by Market Headwinds
The decision comes amid a challenging market environment, particularly in the U.S., where high interest rates have reduced demand for residential solar power systems. As a result, SolarEdge has faced growing inventory levels and anticipates continued pressure on its margins.
It is worth highlighting that the company missed sales and earnings expectations by a wide margin in the third quarter. Further, SolarEdge posted a substantial Q3 net loss of $15.33, compared to a loss of $0.55 in the year-ago quarter. At the same time, revenue declined 64% year-over-year to $260.9 million.
Given its weak performance, the company’s decision to close the energy storage division reflects its efforts to boost its financial position. Importantly, SolarEdge’s interim CEO, Ronen Faier, said that the move aligns with the company’s strategy to achieve financial stability and deliver positive cash flows and profits.
Is SEDG Stock a Good Buy?
Turning to Wall Street, SEDG has a Moderate Sell consensus rating based on one Buy, 14 Holds, and seven Sells assigned in the last three months. At $11.71, the average SolarEdge price target implies a 21.2% downside potential. Shares of the company have declined over 84% year-to-date.
