One of today’s biggest losers is SolarEdge (NASDAQ:SEDG). Today’s drop of more than 18% in SEDG stock has taken the market by surprise. However, given the fact that it’s still earnings season, these sorts of moves are more commonplace right now.
Indeed, it was earnings that drove today’s selloff in SEDG stock. The company reported mixed second-quarter results, with adjusted earnings per share coming in at 95 cents. This was well below the analyst consensus of $1.38 per share. Revenue also missed, albeit slightly, though revenue from the company’s solar segment did beat to a marginal degree.
These results weren’t great. However, the company’s outlook moving forward is what appears to have spooked investors to a greater degree. A depreciating euro and other macro factors could impact margins, which were lower than many expected. The ultimate forward-looking hit to margins could be substantial, given that nearly one-third of the company’s business is in Europe.
With that said, let’s dive into what investors should make of SolarEdge right now.
SEDG Stock and a Cloudy Future
Notably, SolarEdge has been one of the better-performing stocks in the market of late. The company’s solar power segment is performing well and hit record revenue this past quarter. Combined with an interest in solar stocks tied to President Joe Biden’s infrastructure spending bill, there is some positive momentum in this sector worth considering.
However, given how far SEDG stock had run into its earnings report, the overall numbers underwhelmed investors significantly. The extent to which the company can turn things around remains to be seen. That’s because many of the factors driving the company’s top and bottom-line results are out of its control (no company can impact currency effects and the macro environment).
Thus, despite being profitable, SolarEdge still trades at a high valuation multiple relative to the market. At nearly 95-times earnings, SolarEdge looks to be a high-growth stock with a valuation multiple to match. If earnings growth doesn’t materialize as planned, this stock could have further downside ahead.
Thus, despite bullish analyst reviews on SolarEdge, I’m on the sidelines with this name right now. In this environment, there’s plenty of uncertainty. Accordingly, companies like SolarEdge may be more volatile in the months to come.