SolarEdge Is Up 5% After Goldman Adds Stock To 'Conviction Buy' List

• Shares of Solaredge Technologies Inc SEDG have appreciated 48.31 percent over the past one month, rising more than 5 percent in premarket trade on January 5.
• Brian Lee of Goldman Sachs has maintained a Buy rating on the company, while raising the price target from $32 to $41.
• While adding the stock to Goldman Sachs’ Americas Buy List, Lee mentioned that the stock had 46 percent upside potential.

Analyst Brian Lee explained that the bullish view on the stock had two reasons. Firstly, Solaredge Technologies is “the optimal way to leverage the rooftop solar investment theme given its strong balance sheet and cash flow generation.”

Secondly, Lee believes that energy storage could add another 10-15 percent upside to the company’s earnings by CY2017, “making SolarEdge an early play on the emerging grid batteries investment theme.”

Lee believes that the company is as levered as most of its peers to the U.S. residential market, which accounts for about 75 percent of Solaredge Technologies’ sales.

In addition, Lee mentioned that investor concerns regarding increased ASP pressure on the supply chain, driven by a stepdown in tax credit, are overdone, given the unanticipated policy tailwind.

“We see SolarEdge positioned to see volume upside in 2016 driven by an emerging energy storage opportunity via its partnership with Tesla Motors Inc TSLA,” Lee stated.

The EPS beat and raise quarters seen since Solaredge Technologies’ IPO is expected to persist through 2016.