SolarEdge Analysts Highlight Accelerating Demand With Margin Upside Post Q3 Results

SolarEdge Analysts Highlight Accelerating Demand With Margin Upside Post Q3 Results
  • Needham analyst Vikram Bagri maintains SolarEdge Technologies Inc SEDG with a Buy and cut the price target from $380 to $370.
  • SEDG reported a mixed 3Q22 with a beat on revenues, but a large EPS miss primarily due to higher taxes
  • The guidance implies a sequential step-up in gross margin in 4Q22, but flat operating margins as 3Q22 benefited from an FX impact on OpEx.
  • Management expects to reach gross margin outlined at the analyst day by 2Q23, driven by solid revenue growth, margin expansion, and operating leverage. 
  • Production improved with Shanghai exiting lockdown restrictions, though some shipments still required expediting, given the low inventory heading into 3Q22. 
  • Supply chain rather than production remains the bottleneck. 
  • BMO Capital analyst Ameet Thakkar reiterated Outperform and raised the price target to $316 from $306.
  • He came away from SEDG 3Q22 earnings feeling a bit more confident that margins likely bottomed out during Q2, and the last three-quarters of worse-than-expected margins were not a result of any structural issues. 
  • He saw near-term drivers like more Mexico ramps and less need for expedited shipping. 
  • He also saw longer-term drivers, like U.S. contract manufacturing, shift to self-supply on battery sales. 
  • All the factors will likely help re-focus investors on SEDG’s ability to play a significant role in solar growth in Europe and elsewhere.
  • Stephens analyst Cameron Lochridge reiterated Overweight. He noted that Q3 results reflect strong shipments for both inverters and battery solutions, particularly in Europe.
  • Despite headwind related to FX, adjusted gross margins expanded Q/Q as supply chain pressures eased and pricing actions took hold. 
  • Additionally, operating leverage drove the decline in opex as a percent of sales in the Solar segment. 
  • Looking ahead, SEDG guided 4Q22 revenue above prior consensus at the midpoint while adjusted gross margins will likely move higher, which he views as critical for sentiment to begin improving.
  • Price Action: SEDG shares traded higher by 18.1% at $249.63 on the last check Tuesday.
  • Photo Via Company

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