Goldman Downgrades to Neutral, off Americas Conviction List

Solaredge Technologies Inc SEDG shares have declined 23 percent since January 5, when it was added to Goldman Sachs’ Americas Conviction Buy List.

Goldman Sachs’ Brian Lee downgraded the rating on the company from Buy to Neutral, while lowering the price target from $42 to $25.

Limited Near Term Upside

Taking the name off the Americas Conviction Buy List, Lee mentioned, “SolarEdge has executed well (5 straight EPS beats including C1Q) against a challenging backdrop in which many of its customers have faltered in recent quarters.”

However, the analyst expects near term upside for the stock to be limited due to the “consistent mis-execution and de-rating in growth prospects at rooftop solar peers,” till the time there is an inflection in both the broader volume trends and investor sentiment.

Tough Investment Environment

Lee stated that at the beginning of 2016, there had been expectations of Solaredge Technologies offering compelling leverage against a backdrop of peers witnessing financing concerns and/or balance sheet underperformance.

“To that end, SolarEdge has continued to post better than expected EPS growth while strengthening its balance sheet to sport c.$4/share of cash against no debt. However, we were wrong, in gauging not only the extent to which growth at some of its key customers would de-rate, but also the impact it would have on valuations in the space,” Lee said.

The analyst explained that there now is a difficult investment environment for the entire vertical, which is likely to continue in the near term.