Shares of Israel-based company SolarEdge Technologies (NASDAQ:SEDG) plunged 19% in Wednesday’s extended trading session after the maker of solar inverters reported dismal third-quarter earnings and issued a lackluster outlook for the fourth quarter. A high interest rate environment and macro pressures have impacted the demand for solar products. Last month, the company warned investors about a weak third quarter and lowered its expectations.
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SEDG’s Disappointing Q3 Results
SolarEdge’s revenue declined 27% to $725.3 million and lagged analysts’ consensus estimate of $769 million. The company slipped to a loss per share of $0.55 from adjusted earnings per share (EPS) of $0.91 in the prior-year quarter and missed the Street’s EPS estimate of $0.83 per share. Further, the adjusted gross margin declined sharply to 20.8% from 27.3% in the prior-year quarter.
EO Zvi Lando blamed the weak results on a slow market that resulted in the piling up of inventory in the company’s distribution channels, particularly in Europe. High interest rates have impacted the demand for solar products. Additionally, the company’s demand in the U.S. market has also been hit by California’s Net Energy Metering (NEM) 3.0 rule, which significantly cut the compensation rate that homeowners receive for sending excess solar production to the grid.
Coming to guidance, the company expects Q4 2023 revenue in the range of $300 million to $350 million, which is way below the prior-year quarter’s revenue of $890.7 million. Management projects margins to gradually improve in the first and second quarters of 2024, with the company continuing to reduce costs and revenues returning to a more normalized level.
Is SolarEdge a Good Stock to Buy?
Wall Street is cautiously optimistic on SolarEdge, with a Moderate Buy consensus rating based on 13 Buys, 12 Holds, and one Sell. The average price target of $137.21 implies 81% upside potential. Shares have plunged 73% year-to-date.
The company’s disappointing results and poor outlook could trigger some downward revisions in analysts’ price targets.
