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Investing.com -- SolarEdge Technologies (NASDAQ:SEDG) could see positive market share implications from the termination of 25D tax credits, according to RBCon Tuesday, which raised its price target to $22 from $12.
The bank believes SolarEdge’s U.S. market share is heavily weighted toward third-party ownership (TPO) systems, which will gain an economic advantage when the 25D tax credit ends at the end of 2025.
RBC noted that SolarEdge’s U.S. market share has stabilized in recent months despite competition from the Powerwall 3.
The company currently holds less than 10% market share in non-TPO system installations, which account for approximately 45% of current U.S. residential market demand.
In contrast, SolarEdge maintains an estimated 20-25% market share among TPO lease/PPA providers.
As customer demand shifts toward these providers following the tax credit termination, SolarEdge should experience incremental share gains from 2025 onward.
RBC adjusted its estimates higher after the final terms of the Omnibus Budget Bill (OBBB) maintained ITC (NSE:ITC) credits, which the bank had previously assumed would be disqualified.
The bank’s 2026 and 2027 revenue forecasts of approximately $1.49 billion and $1.58 billion are 5-10% above consensus.
For the second quarter of 2025, SolarEdge guided revenue between $265-$285 million and adjusted gross margin of 8-12%, which includes a 2 percentage point tariff headwind.
This implies incremental margins of approximately 30% when adjusted for tariffs, highlighting the operational leverage in the business model.
RBC expects gross margins to increase further in the second half of 2025, benefiting from less-than-feared tariff impacts and normalization of European inventories by the end of the second quarter.
Another round of structural improvements is anticipated in late 2025 or early 2026 with the launch of the next-generation residential portfolio, which is expected to have a lower cost structure.
The bank sees a path to 25% adjusted gross margins next year for SolarEdge, while maintaining a Sector Perform rating with Speculative Risk.
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