Goldman Sachs Analyst Optimistic On SolarEdge's Strong Domestic Manufacturing, European Expansion

Goldman Sachs analyst Brian Lee shared key takeaways from investor meetings with SolarEdge Technologies, Inc. SEDG.

Lee, who retained a Buy rating with a price target of $31, expects domestic content and TPO market exposure to drive market share gains. He also says the company’s MLPE solution is the best way to maximize domestic content.

Despite lower US sales in fourth quarter of 2024, favorable trends should support demand growth, he added.

With full domestic manufacturing capacity, SEDG plans to ship products to Europe starting in 2026 for margin improvement.

Management is confident that European channel inventories will normalize by the end of the second quarter of 2025.

The company also expects to benefit from 45X credits through new C&I inverter production and sees its safe harbor deals as less risky than competitors’ near-term deals, adds the analyst.

Lee says that with domestic manufacturing for residential and C&I now complete, SEDG aims to generate cash flows and benefit from IRA credits.

SolarEdge should also pay down convertible notes later this year while maintaining over $400 million in cash on its balance sheet. It had around $700 million at the end of 2024, Lee said.

Management plans to reduce fixed costs within cost of goods sold and lower operating expenses to $85 million-$95 million by year-end, with further reductions next year, adds the analyst.

The analyst writes that SEDG expects above-normal seasonal growth in 2025 due to factors like normalizing channel inventories, price reductions, domestic content, and safe harboring.

Typical seasonality includes:

• +5% shift in first-quarter
• +20% in second-quarter
• +5% in third quarter, and
• -15% in fourth-quarter.

Safe harboring could boost the second-quarter uplift, adds the analyst.

Despite weak European demand and price cuts, management expects a 10% YoY price drop, considering US price increases and greater US weighting.

Last week, SolarEdge reported fourth-quarter results. Revenues of $196.2 million beat the consensus of $188.704 million. The adjusted loss per share of $3.52 missed the street view for a loss of $1.65.

Investors can gain exposure to the stock via two ETFs: 

ProShares S&P Kensho Cleantech ETF CTEX and SPDR S&P Kensho Clean Power ETF CNRG.

Price Action: SEDG shares are down 0.49% at $18.37 at the last check Tuesday.

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