KeyBanc upgrades SolarEdge stock to Sector Weight on tax credit changes

Investing.com - KeyBanc Capital Markets upgraded SolarEdge Technologies (NASDAQ:SEDG) from Underweight to Sector Weight on Tuesday, citing the upcoming expiration of residential solar tax credits. The stock has shown strong momentum, gaining over 76% in the past six months, according to InvestingPro data.

The investment firm noted that residential solar tax credits for individuals are set to phase out at the end of 2025, which could pose challenges for SolarEdge’s business model.

KeyBanc highlighted SolarEdge’s higher reliance on cash and loan sales, as well as its dependence on smaller dealers that don’t participate in the third-party ownership market, as factors that make the company vulnerable to the tax credit expiration.

Despite these challenges, KeyBanc views SolarEdge as better positioned than competitor Enphase Energy (NASDAQ:ENPH), which the firm continues to rate as Underweight due to its higher-priced premium products and lower international sales mix.

The firm indicated it is waiting for more clarity on how companies in the sector will pivot in response to the changing incentive landscape before making further rating adjustments.

In other recent news, SolarEdge Technologies has been the subject of several analyst updates and significant corporate developments. UBS analyst Jon Windham increased the price target for SolarEdge to $20, up from $17, citing the potential impact of U.S. policy changes on the solar market. Meanwhile, Bank of America analysts have lowered their estimates for SolarEdge’s future U.S. volumes due to policy risks, reducing projections to 1.9 gigawatts for 2026. SolarEdge’s annual shareholder meeting saw the election of six directors and the ratification of auditors, though a proposal to amend the company’s charter did not pass.

GLJ Research upgraded SolarEdge’s stock rating from Sell to Hold, influenced by the expected return of a "Solar Friendly" Senate that may support energy tax credits. Similarly, Northland analyst Gus Richard raised the stock rating to Market Perform, maintaining a price target of $15.50, citing SolarEdge’s position as a non-Chinese supplier with strong cybersecurity capabilities. These updates come amid discussions about the role of utility-scale solar as a cost-effective solution for increasing electricity generation capacity. SolarEdge’s strategic positioning in the industry is underscored by the rising demand for electricity driven by various sectors, including transportation and data centers.

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