SolarEdge Technologies faced a significant blow early Wednesday as revenue drastically declined in the fourth quarter, leading to a bleaker outlook than anticipated.
Stock Plummets
Shares of SolarEdge plummeted by 15% to $72 during early trading, marking a staggering 75% drop over the past year.
Industry Struggles
Solar stocks, in general, have been facing challenges. Factors such as increased interest rates and alterations to California’s rooftop solar incentives have negatively impacted the demand for solar panels. Moreover, European demand has also seen a significant decline.
Restructuring Efforts
In response to the ongoing difficulties, SolarEdge announced a restructuring plan that involves cutting about 16% of its workforce in an effort to reduce costs.
Analyst’s Perspective
Sophie Karp, an analyst at KeyBanc Capital Markets, expressed that SolarEdge’s results and statements indicate a lengthier path to recovery compared to what peers have suggested. Despite the tough forecast not being unexpected, Karp highlighted that the extended downturn in demand may deter investor interest for the time being.
Maintaining a Sector Weight rating on the stock, Karp pointed out that SolarEdge’s cost-saving measures might not be enough to combat the lingering demand slump.
Solar Equipment Maker Reports 65% Drop in Q4 Revenue
In a recent announcement, the solar-equipment maker revealed a significant decline in revenue for the fourth quarter. The total revenue amounted to $316 million, marking a 65% decrease compared to the same quarter last year. Notably, revenue from the solar segment saw a 66% drop, totaling $282 million.
Sales Fall Short of Expectations
Despite Wall Street’s low expectations, the company’s sales still missed the mark. According to FactSet data, analysts were anticipating revenue of $323 million, but SolarEdge fell short. However, the adjusted loss per share of 92 cents was narrower than the consensus loss of $1.34.
Grim First-Quarter Outlook
Looking ahead, SolarEdge’s first-quarter forecast is well below estimates. The company anticipates reporting revenue between $175 million and $215 million for the first three months of the year, a stark contrast to analysts’ projections of $338 million.
Impact of Interest Rates
The current landscape of interest rates has played a significant role in shaping market demand. With the Federal Reserve potentially delaying rate cuts, the industry’s outlook appears even more uncertain.
Canaccord Genuity analyst Austin Moeller emphasized the challenges posed by high interest rates amidst strong GDP and inflation figures. He pointed out that consumers are likely to postpone financing for home solar installations until rates become more favorable. As a result, Moeller has a Hold rating on the stock with a price target of $75.
Solar Stocks Facing a Downturn
Other solar stocks followed a similar trend early Wednesday, with Enphase Energy dropping 3%, Sunrun falling 2.6%, SunPower down by 4%, and First Solar seeing a decline of 3.2%. This dip reflects a challenging period for companies in the solar energy sector.
