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On Thursday, Guggenheim analysts highlighted a silver lining for First Solar (NASDAQ:FSLR) amidst legislative changes that have impacted the solar industry. The firm noted that manufacturing subsidies, which benefit the company, remain unaltered. This development comes in contrast to the detrimental revisions affecting residential solar companies.
The revised language in the Inflation Reduction Act (IRA) now equates the timing and treatment of leased solar assets with those owned by customers. Previously, the tax credit for homeowners with their own residential solar power systems was eliminated, while leased systems, provided by companies like Sunrun (NASDAQ:RUN), retained the credit. The new amendment removes this credit and accelerates the termination to 60 days after the legislation’s enactment. This change is expected to have severe repercussions for the residential solar industry, which relies heavily on third-party financing such as leases or power purchase agreements (PPAs).
The Guggenheim analysts expressed concern for companies like Sunrun, Enphase Energy (NASDAQ:ENPH), and SolarEdge Technologies (NASDAQ:SEDG), which may face significant challenges due to these adjustments. According to InvestingPro data, SolarEdge’s financial health score is currently rated as weak, with revenue declining by 59% over the last twelve months. The company’s stock has experienced significant volatility, falling 62% over the past year despite a recent 67% surge over the last six months. The outlook for these companies is particularly grim, with approximately 70% of the residential solar industry depending on such financing models. For SolarEdge specifically, InvestingPro analysis reveals concerning metrics, including negative gross profit margins and analysts’ expectations that the company won’t be profitable this year. While the company maintains a healthy current ratio of 2.04, indicating sufficient liquidity to meet short-term obligations, it operates with a moderate debt level. (Discover 10+ additional exclusive insights about SolarEdge with an InvestingPro subscription.)
Despite these challenges for residential solar entities, U.S.-based manufacturers like First Solar appear to be in a favorable position. The analysts did not identify any changes in the revised legislative language that would shorten the timeframe for 45X manufacturing subsidies compared to the original draft. This stability is deemed positive for First Solar, as well as for other companies in the sector, including Nextracker (NASDAQ:NXT) and Array Technologies (NASDAQ:ARRY), which also maintain a ’Buy’ rating from Guggenheim.
While the adjustments to lease financing credits are considered significantly negative for Sunrun and SolarEdge, the unchanged manufacturing subsidies present an opportunity for First Solar to capitalize on its U.S. manufacturing presence. Guggenheim will continue to monitor further developments, but for now, the unchanged subsidies represent a positive outcome for First Solar in a time of legislative uncertainty for the industry. For detailed analysis of SolarEdge’s potential recovery prospects and comprehensive financial health metrics, investors can access the full Pro Research Report, available exclusively on InvestingPro, which provides expert insights on over 1,400 US stocks.
In other recent news, SolarEdge Technologies has been the focus of multiple analyst assessments and financial updates. UBS recently adjusted their price target for SolarEdge to $17.00 from $22.00, maintaining a Neutral rating, following the company’s first-quarter earnings report for 2025, which showed an adjusted EBITDA slightly above market expectations. Meanwhile, GLJ Research increased their price target to $6.90 from $3.90 but retained a Sell rating, citing concerns over revenue recognition practices and broader market conditions. Canaccord Genuity also raised their price target to $16.50 from $14.00, keeping a Hold rating, and noted potential market share gains in Europe.
Citi continues to maintain a Buy rating for SolarEdge with a $39.00 price target, despite industry challenges. Northland, however, downgraded the stock from Outperform to Market Perform, with a consistent price target of $15.50, due to valuation concerns and ongoing uncertainties in U.S. tax policy. These varied analyst perspectives highlight the complex factors influencing SolarEdge’s financial outlook, including tariffs, market dynamics, and revenue strategies.
Despite differences in ratings and targets, analysts agree that SolarEdge is navigating a challenging macroeconomic environment. The company’s future performance is closely tied to its ability to manage tariffs and leverage market opportunities, particularly in Europe. These developments provide investors with a nuanced view of SolarEdge’s current position and potential trajectories.
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