SolarEdge Technologies' Q4 Miss Could Be Due To Structural Issues: 7 Analysts Provide Their Takeaways

SolarEdge Technologies Inc SEDG shares tanked in early trading on Wednesday, after the company issued weak first-quarter guidance.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the release.

RBC Capital Markets On SolarEdge Technologies

Analyst Christopher Dendrinos maintained a Sector Perform rating while reducing the price target from $85 to $77.

“SEDG's manufacturing strategy utilizes a combination of in-house and contract manufacturers that results in a higher fixed cost structure,” Dendrinos wrote in a note.

While this proved to be a benefit when revenues were rising, as “fixed costs spread across more unit sales,” it turned into “an increasing headwind as revenues decline,” the analyst stated. “In 4Q23, revs declined 56% q/q while COGS only declined 47%, and this resulted in gross margins down ~17.5pp q/q to 3.3%,” he added.

BMO Capital Markets On SolarEdge Technologies

Analyst Ameet Thakkar reiterated a Market Perform rating while cutting the price target from $85 to $80.

SolarEdge’s first-quarter revenue and gross margin guidance came in “materially worse than we expected, and it's unclear if some of this is structural,” Thakkar wrote in a note.

“Cash burn resumed after prior call had suggested under-shipping would result in FCF generation,” the analyst stated. “Finally, it sounded to us that under-shipments may extend for most of 2024,” he added.

Piper Sandler On SolarEdge Technologies

Analyst Kashy Harrison reaffirmed a Neutral rating while trimming the price target from $105 to $77.

The company expects the destock process to persist through yearend 2024, “as it is removing $750M of product from the channel during the year,” Harrison said.

He added, however, that even if management’s sell-through expectations were to come to fruition, “revenues are unlikely to approach $600-$650M until 2025.”

Check out other analyst stock ratings.

Oppenheimer On SolarEdge Technologies

Analyst Colin Rusch maintained a Perform rating on the stock.

SolarEdge’s fourth-quarter results were better than feared and its first-quarter guidance “came in at ~50% of consensus revenue expectations with GM ~1250 bps below Street estimates,” Rusch wrote in a note.

“While SEDG detailed tangible drivers for GM recovery throughout the year, we believe the diversity of products and end-markets SEDG serves points to the potential for an uneven recovery,” the analyst stated. “For now, we remain on the sidelines looking for additional evidence of sell-through and margin recovery,” he added.

Truist Securities On SolarEdge Technologies

Analyst Jordan Levy reiterated a Hold rating and price target of $80.

SolarEdge’s fourth-quarter revenue miss was “mild,” while the miss on gross margins and opex was “more sizable,” Levy said.

“While the 4Q miss isn't likely to be a big deal to investors, guidance 1Q24 topline/GM guidance came in more meaningfully below our/Street estimates as the company continues to work to drive down channel inventories likely with more aggressive levels of undershipment vs. 4Q23,” he added.

Guggenheim Securities On SolarEdge Technologies

Analyst Joseph Osha reaffirmed a Neutral rating on the stock.

“SEDG Q4 earnings were generally in line with our forecasts, setting aside the impact of a non-recurring charge driven by the windup of SEDG’s ill-fated commercial EV venture,” Osha wrote.

“The company is still working through excess inventory in both the U.S. and major European markets, which has impacted revenue and which has also caused profitability to decline as utilization rates have declined,” he further stated.

KeyBanc Capital Markets On SolarEdge Technologies

Analyst Sophie Karp maintained a Sector Weight rating.

Solar revenues in Europe declined by 35% in the quarter, “due to continued inventory challenges in the European channels from significant unexpected cancellations and pushouts of existing backlog from distributors,” Karp said.

“The U.S. was still weak this quarter; the residential market was impacted by lower electricity prices, higher interest rates, and NEM 3.0 in CA, causing a decrease in residential demand,” the analyst added.

SEDG Price Action: Shares of SolarEdge Technologies declined by 11.09% to $75.06 at the time of publication Wednesday.

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