Goldman Sachs analyst Brian Lee revised ratings for key residential solar stocks. The analyst notes there is a disconnect between the mid-to-long-term fundamentals and valuations for solar/storage equities heading into 2025.
Solar equities appear to be overpricing risks tied to policy uncertainty, even though secular growth drivers, such as U.S. power demand and pricing, remain strong.
SEDG: The analyst upgraded SolarEdge Technologies, Inc. SEDG rating to Buy from Sell and raised the price target to $19 (from $10 prior).
After a challenging period, including a tough U.S. residential solar market and weaker European demand, the analyst notes estimates have bottomed, and concerns about SEDG’s $350 million debt in 2025 are overstated.
SEDG’s recent cost-cutting measures, including headcount and facility reductions, strengthen the outlook, adds the analyst.
Lee says that while the call may be early, he sees a turnaround as the company benefits from improved cost control and a better product mix.
The analyst sees FY25 as a key inflection point, with growth likely accelerating in FY26.
The analyst estimates negative EPS for FY25 but expects a positive fourth-quarter FY25 and strong growth in FY26. The EPS estimate of $1.64 for FY26 is well above the consensus of $0.55, adds the analyst.
CSIQ: Meanwhile, Lee downgraded Canadian Solar Inc. CSIQ to Sell from Neutral and cut the price target to $11 (from $14 prior).
The analyst’s negative outlook stems from policy risks under the Trump administration and tariffs on solar imports from Southeast Asia.
As a major foreign supplier of solar panels to the U.S., CSIQ is highly exposed to these risks, which will impact its margins, especially given the U.S. has been one of the more profitable markets recently, says the analyst.
The analyst also sees consensus estimates as overly optimistic, with the 2025-2026 EBITDA projections 35% – 40% below the Street’s, as recent policy changes and the uncertain outlook are not fully reflected in market expectations.
The analyst says 2024-2025 EBITDA estimates remain largely unchanged, while the 2026 estimate is revised down by 6% to $688 million due to a bleak outlook.
Price Action: SEDG shares are up 23.3% at $15.19, while CSIQ shares are up 0.86% at $11.76 at the last check Tuesday.
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