What Happened to the SolarEdge Technologies Stock Price Today?
- Shares of leading solar company SolarEdge Technologies (NASDAQ:SEDG) dropped sharply in early May, with SEDG stock shedding more than 15% in a single day after the company reported first-quarter numbers that were quite good.
Source: rafapress / Shutterstock.com - The problem? SolarEdge is guiding for inflation to whack the company’s profit margins in the second quarter of 2021.
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SEDG Earnings: The Fine Print
- SolarEdge’s first-quarter numbers were very good.
- Across the board, the company grew nicely in the quarter, continuing what has been a multi-quarter rebound from a trough in solar installation activity in 2Q20.
- The number of optimizers the company shipped in the quarter grew 3% sequentially. Inverter volume grew 10%. Megawatts of solar deployed grew 24%. Revenues rose 13%. Gross margins expanded 400 basis points.
- But SolarEdge said that inflation will hurt the company in Q2.
- Specifically, management said that higher prices for steel and aluminum, as well as elevated freight costs, will weigh on profit margins going forward. Management is guiding for 2Q20 gross margins of 33%, down sequentially and flat year-over-year.
- The news follows similar calls of inflation-induced margin pressures from peers Enphase Energy (NASDAQ:ENPH) and Maxeon Solar (NASDAQ:MAXN).
- SEDG stock dropped sharply in response.
How It Affects SEDG Stock Holders
- There price pressures are ephemeral. They will pass. Aluminum and steel production will ramp in the coming months, and help fix supply shortages in that market. Meanwhile, company-enforced mobility restrictions will ease in the coming months, too, and freight costs will fall.
- Demand for SolarEdge’s cutting-edge optimizers and inverters will not wane anytime soon. Instead, it will only accelerate as falling costs, increasing government support and improving technology spark a huge shift in consumer demand toward solar.
- In other words, the good stuff here will last, and the bad stuff won’t.
- Bottom Line: We would be buyers of SEDG stock on this dip.
SEDG Stock Price Forecast
- The gross overreaction in SEDG stock to near-term inflation pressures is creating an opportunity.
- We believe SolarEdge stock is worth closer to $350 today, based on the company’s promising long-term growth potential.
- We fully expect shares to bounce back above $300 by the end of the year. A run towards $400 could be in the cards once inflation pressures subside.
The tech sector meltdown has created multiple golden buying opportunities. And SEDG stock is one such opportunity that ranks among my top “Green Wave” stocks to buy, but it’s far from my only pick.
The world’s energy production is pivoting to renewable sources of energy. By 2040, oil and gas will be relics of a world long forgotten, and we will live in a world powered by solar, wind and hydrogen.
My top hypergrowth stocks in this megatrend include the companies shaping this future with next-generation solar panels, AI-powered energy storage solutions and breakthrough hydrogen technologies.
Get the complete list of stocks to buy in the Green Wave megatrend by subscribing to Innovation Investor today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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