D-Wave Quantum falls nearly 3% as earnings miss overshadows revenue beat
On Thursday, JPMorgan maintained its Overweight rating on shares of SolarEdge Technologies (NASDAQ:SEDG) but reduced the price target to $35 from the previous $50. The adjustment follows SolarEdge's second-quarter performance, which showed earnings per share (EPS) falling short of expectations despite slightly better-than-anticipated revenue.
The company's third-quarter revenue and gross margin guidance were significantly lower than expected, as SolarEdge continues to address excess channel inventory, especially in Europe. While the U.S. inventory surplus is projected to be resolved by the end of the third quarter of 2024, the timeline for clearing European inventory has been extended into the second quarter of 2025, a delay from the initial forecast of year-end 2024.
SolarEdge anticipates generating free cash in the first half of 2025. This financial outlook, coupled with unclaimed Investment Tax Credits (ITC) from the Inflation Reduction Act (IRA), is expected to provide sufficient liquidity for the company to manage its debt obligations due in the third quarter of 2025. However, JPMorgan acknowledges that until there is an improvement in execution, these concerns may continue to affect the company's stock performance.
Furthermore, SolarEdge has revised its normalized demand outlook downward, which, while aligning with subdued investor expectations, could be seen as a negative signal for consensus revenue forecasts for fiscal years 2025-2026.
JPMorgan has adjusted its own estimates to account for a protracted revenue recovery and a slower margin improvement than previously anticipated, based on additional information provided by the company. Despite the lowered price target, JPMorgan reiterates its confidence in SolarEdge's long-term potential and believes that current investor concerns regarding the company's liquidity may be overstated.
InvestingPro Insights
In light of JPMorgan's recent assessment of SolarEdge Technologies, a glance at real-time data and InvestingPro Tips can provide additional context for investors. As of the latest figures, SolarEdge has a market capitalization of $1.35 billion, reflecting the impact of recent stock performance. A notable metric is the company's negative P/E ratio of -5.24 on a trailing twelve-month basis, which has adjusted to -7.53, indicating earnings challenges. Moreover, revenue has experienced a significant decline of 34.19% over the last twelve months.
InvestingPro Tips highlight that management has been aggressively buying back shares, which could be seen as a vote of confidence in the company's future. Moreover, SolarEdge is trading at a low revenue valuation multiple, which might attract investors looking for potential value plays. However, it is important to note that the company's stock has taken a substantial hit over the last week, month, and six months, with price returns reflecting sharp declines in these periods.
For investors seeking a deeper dive into SolarEdge's financials and stock performance, InvestingPro provides a comprehensive list of 19 additional tips, including insights on profitability, cash flow yield, and debt levels. Investors can access these detailed tips at https://www.investing.com/pro/SEDG, which may further inform their investment decisions regarding SolarEdge Technologies.
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