SolarEdge Technologies (NASDAQ: SEDG) is an Israel-based company that occupies a unique niche in the solar power industry. Generally speaking, most of the names that get the headlines are the photovoltaic panel makers or the companies that build commercial and utility scale systems. That isn’t what SEDG is about.
It fills the quiet yet necessary role of building some of the most popular inverters in the market today. It also has created an integrated system that stores the energy for use when the sun isn’t shining or there’s a power outage on the grid.
What Does SEDG Do?
Inverter companies don’t usually get a lot of press because what they do is less easily understood and that can make it difficult to explain to the uninitiated. I will attempt a simple explanation here.
Basically, the power generated from renewable energy (wind and sun in particular) comes in as DC (direct current) electricity. But the grid and all the infrastructure the grid supplies with power — homes, businesses, etc — all run on AC (alternating current).
Using a home with solar panels as an example, the panels generate DC which then has to be converted to AC to make it work. This conversion is what is call in the industry, ‘inversion’. SEDG makes the equipment that converts DC to AC.
Simple enough.
But it also gets a bit more technical since the AC has to be maintained in a certain frequency bandwidth so the power can be used. You just can’t pull it from the panels, invert it and use it.
This piece of the process is crucial, especially if excess power is going to be uploaded back onto the grid, or stored.
The point is, inverters are crucial to make renewable energy systems function. And the better you are at building inverters, the bigger your opportunities.
SEDG Stock’s Place in a Growing Industry
According to Statista, solar panel demand is expected grow by nearly 50% over the next 4 years. That is a very healthy growth rate.
Right now, some of that growth has been slowed by the trade war playing out between China and the U.S. One of the key sectors that the U.S. is focusing on is the solar industry. The claim is China is dumping panels into the U.S. market, which makes U.S. firms struggle to grow market share at home. U.S. solar firms also don’t have the ability to access the Chinese market like the Chinese do the U.S. market.
This is reflected in the gains we’ve seen in SEDG stock. For the past 12 months, SEDG is up 77%. But year-to-date (a full 8 months of that 12 months) SEDG stock is only up around 25%.
With a $2 billion market cap, SEDG isn’t a big firm, but for a pure-play inverter company, it is king. There are plenty of ways to play growing inverter demand through other more diversified tech firms, but SEDG is a way to get all the power that renewables have to offer.
And as an Israeli company, it can still sell into big growth markets like Europe and China and the U.S. even while the trade wars continue.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
