SolarEdge Technologies (NASDAQ: SEDG) witnessed a significant decline in its stock price, with a sharp 25% drop in pre-market trading following the release of the solar company’s preliminary financial results for the third quarter.
The revenue forecast for Q3 has been revised downwards to $720-730 million, a considerable reduction from the earlier projected range of $880-920 million. This comes in contrast to the consensus estimate of $909.02 million.
CEO Zvi Lando explained, “During the latter part of the third quarter of 2023, we experienced substantial, unforeseen cancellations and delays in our European distributor backlog. We attribute these cancellations and delays to higher-than-expected inventory levels in the distribution channels and slower-than-anticipated installation rates.”
In addition, the management anticipates significantly lower revenues in the upcoming Q4, primarily due to the ongoing inventory destocking process.
The disappointing results prompted at least three analysts to downgrade their assessments of SolarEdge’s stock. Goldman Sachs analysts shifted their rating from “Buy” to “Neutral,” citing deteriorating visibility. They noted, “After a second consecutive quarter of disappointing results and guidance, we find it challenging to maintain a positive stance on the stock. We underestimated the combined impact of ongoing inventory issues, end-market demand fluctuations, and emerging margin concerns, all of which are expected to present headwinds for the stock in the foreseeable future, given what appears to be a significant decline in visibility.”
Likewise, Roth MKM analysts also downgraded their rating to “Neutral” from “Buy,” expressing concerns over ongoing residential challenges in the European and U.S. markets. They stated, “We expect challenges in the European and U.S. residential sectors to persist. Coupled with foreign exchange headwinds and the ongoing Israeli conflict, we are taking a step back and downgrading our rating to ‘Neutral’ from ‘Buy’ until visibility improves.”
SolarEdge’s Q3 warning has sent shockwaves through the market, leaving investors and analysts cautious about the company’s future performance. Additional reporting by Senad Karaahmetovic.
