Sunrun Inc (NASDAQ:RUN) shares are down by 8.5% to $9.68 on Friday morning. This decline is amid broader weakness in solar-related stocks, which are reacting to the weak preliminary third-quarter outlook provided by SolarEdge Technologies. SolarEdge also adjusted its non-GAAP gross margin guidance downward.

What Happened?

The company revised its third-quarter revenue forecast, lowering it from an initial range of $880-920 million to $720-730 million, falling short of the consensus estimate of $909.02 million. They also reduced the adjusted gross margin from 28%-31% to 20.1%-21.1% and adjusted operating income from $115-135 million to $12-31 million.

These adjustments were prompted by unanticipated order cancellations and delays from European distributors in the latter part of the third quarter of FY23, which were linked to excessive inventory levels and sluggish installation rates....Read More

Why This Matters To Sunrun Investors

A downward adjustment in non-GAAP gross margin guidance by SolarEdge suggests that there may be increased pricing and margin pressure within the solar industry. If SolarEdge is experiencing difficulties maintaining healthy profit margins, this raises concerns for other companies in the sector, including Sunrun. Investors may fear that Sunrun's profitability could also be negatively affected by competitive pricing pressures.

Solar companies often also share supply chain relationships and distribution networks. If SolarEdge faces difficulties or slowdowns in their production or supply chain, it can have a domino effect on companies like Sunrun. This interconnectedness can disrupt Sunrun's operations and supply of solar equipment, impacting their revenue and profitability.

See Also: Are Global Markets Signaling Pessimism?

According to data from Benzinga Pro, RUN has a 52-week high of $33.33 and a 52-week low of $9.60.