SolarEdge v. SolarCity

By Linda McDonough • August 5, 2016

SolarEdge continues to trend lower in response to Tesla’s acquisition of SolarCity. Tesla has discussed long term plans to develop its own inverters for SolarCity. Obviously the headline is dramatic but the reality is that SolarCity has been reducing orders to SolarEdge for a few quarters yet SolarEdge continues to meet revenue targets. SolarCity, who used to account for 28% of SolarEdge’s revenue now accounts for just 9%

Revenue from customers outside of SolarCity grew 99% in the March quarter. Our industry contacts tell us that SolarEdge is currently selling its own power solution integrated with the Tesla battery. Any internal product reconfiguration by Tesla would likely take years to develop if indeed this is its intention. We’re hoping for some clarity from SolarEdge management on August 9 when it reports its fourth quarter.

At a recent close of $16.50 SolarEdge trades at just 8 times 2017 estimates. The company also has $3 per share in cash. I have been wrong on the stock so far. However the current price seems to reflect a worst case scenario. The reason I originally picked SolarEdge is that it has been ahead of the curve producing low cost inverters to help its customers win new business in a super competitive pricing environment.

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C. Fisher

09/15/16 ‐ 10:48am ET September 15, 2016 at 10:48am ET

Linda
Can you comment on SEDG? With a $67 target is this hi freq trading just swinging the stock lower to get a better position down the road.? Is there any way to tell? StreetSweeper did a job on SZYM (TVIA) a while back it is just now in a position to recover but it took years. SEDG looked in a better position to handle the fallout so I continued to buy. Is there any chance SEDG could leak some tangible news that may help the stock price? It seems the intangible is bringing the stock down.

Linda McDonough

09/15/16 ‐ 3:17pm ET September 15, 2016 at 3:17pm ET

SolarEdge is currently trading below the $16 stop loss that I have suggested. The company just presented at two brokerage conferences at a solar industry event this week. I have listened to the presentation and found management to be quite bullish. While industry solar growth rates have come down, the stock is trading at ridiculous levels. The company has $4.50 per share in cash and is trading at 7.5 times 2017 estimates. Current estimates look for just 10% earnings growth despite the company just reporting 50% earnings growth last quarter! However I don’t see any other news coming from the company until its first quarter (June 2017 year end) is reported at the end of October. Bears seem to be grabbing onto slower market growth but current estimates do not seem to take into consideration the market share gains that SolarEdge is taking. I will continue to keep you updated on the stock despite it trading below the stop loss. Only if I sell it out of the portfolio entirely would I drop coverage.
Best,
Linda

Reef Enthusiast

09/15/16 ‐ 2:08pm ET September 15, 2016 at 2:08pm ET

I don’t plan on using the stop loss of $16. Will you still follow the stock after its slump?

Hello,
Please see my comments below on SolarEdge. I do plan on keeping you updated on the stock despite it trading below my suggested stop loss.
Best,
Linda

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