SolarEdge Sinks 16% In Pre-Market On Disappointing Sales Outlook

Shares in SolarEdge Technologies Ltd. are tanking 16% in Tuesday’s pre-market trading session as the solar energy company disappointed investors with a weaker sales outlook for the fourth quarter due to the continued economic impact of the coronavirus pandemic.

SolarEdge (SEDG) expects revenues of between $345 million to $365 million in the fourth quarter, which is lower than the sales of $391 million analysts have been projecting. The weaker outlook comes as the company suffered a 18% year-on-year decline in third-quarter revenue to $338.1 million. Analysts on average had been looking for $343 million. During the reported quarter, solar business revenue was down 19% at $312.5 million from the year-earlier period.

Non-GAAP net diluted EPS was $1.21 in the third quarter, up from $0.97 in the prior quarter and flat compared with the same quarter last year. Analysts had forecast EPS of $0.74.

“Our third quarter results reflect significant growth in Europe, despite the current economic slowdown caused by the global pandemic,” said SolarEdge CEO Zivi Lando. “Our solar business outside the U.S. reached an all-time high and the U.S. market is showing signs of return to pre-pandemic installation levels. In addition to continuing to generate significant cash from operations this quarter, we raised $618 million, net of expenses, in convertible debt providing additional support for our continued organic and non-organic growth.”

Commenting on the company’s non-solar business, Lando disclosed that its e-Mobility team is gearing up to launch the first significant batch of full powertrain solutions for assembly in electric vehicles in the fourth quarter.

SEDG shares have had a strong run, surging a stellar 182% this year. That’s with a Moderate Buy analyst consensus divided into 6 Buys versus 4 Holds and 2 Sells.

Following this year’s sharp rally, the $236.45 average analyst price target implies 12% downside potential in the coming 12 months.

B. Riley Securities analyst Christopher Souther last week bumped up the stock’s price target to $378 from $254 and maintained a Buy rating. Souther noted that the performance of the sustainable energy and tech sector has been strong in recent weeks amid investor sentiment that a potential win of Joe Biden in the US presidential election and a potential Democrat sweep would give a boost to green infrastructure.

The analyst expects the election to continue to be the main driver of shares more than the near-term fundamentals reported in the upcoming earnings season. (See SolarEdge Technologies stock analysis on TipRanks).