On Friday (October 20th), the stock price of SolarEdge Technologies, a solar product manufacturer, plummeted by nearly 30% in early trading on the US stock market. It is currently trading at $80.91 per share, the lowest level since April 2020.
SolarEdge is a manufacturer of photovoltaic array power optimizers and inverters headquartered in Israel, and photovoltaic inverters are the core components of solar photovoltaic systems. The company warned on Thursday that demand in the European region has significantly weakened, further hitting the fragile sentiment in the photovoltaic module industry.
According to the press release, SolarEdge's latest forecast for the third quarter of 2023 is that revenue, gross profit margin, and operating profit will all be below the lower limit of the previous guidance range. In addition, as the destocking process continues, the company expects a significant decrease in revenue in the fourth quarter.
Source: SolarEdge official website
CEO Zvi Lando wrote that in the second and third quarters of this year, SolarEdge's European distributors experienced a large number of unexpected order cancellations and delays, which the company attributed to higher than expected channel inventory and lower than expected installation rates.
Lando emphasized that the installation rate was usually expected to increase in late summer and September, but in fact, the installation rate in the third quarter performed much slower. SolarEdge will release Q3 results on November 1st, and the press release specifically mentioned that this adjustment is not related to the situation in the Middle East.
Since July this year, SolarEdge's stock price has been negative for 13 consecutive days on the weekly basis, and is expected to record 14 consecutive negative days after the close. Within the day, institutions such as Deutsche Bank, Citigroup, and Wells Fargo have lowered their target prices for SolarEdge's stock price, with Goldman Sachs directly downgraded its rating by two notches from "buy" to "neutral".
SolarEdge weekly chart
We found it difficult to maintain the rating of the stock and underestimated the unfavorable factors for the foreseeable future, "wrote Goldman Sachs analyst Brian Lee. The weak demand environment in Europe has caused trouble for SolarEdge, and this may not be just a seasonal issue.
Since the beginning of the year, the prices of photovoltaic modules in Europe have decreased by more than 1/4. Just last month, European component prices fell by 9.1% -14.3% month on month. If the price continues to remain between 0.15 euros/W and 0.17 euros/W, there will be a wave of bankruptcy among European photovoltaic module manufacturers.
This situation is affecting the entire value chain, and the market is flooded with a large number of low-cost components that local enterprises cannot compete with. In September of this year, European photovoltaic manufacturer Norsun announced a suspension of production at its factory in Oldar, Norway, claiming that the decline in prices and the accumulation of component inventory have posed significant challenges to local solar companies.
Affected by SolarEdge, the Invesco Solar ETF (TAN) is now down more than 6.7%, reaching a new low since July 2020. In the solar energy sector, Sunrun and Sunnova each fell 6% and 9%, while Enphase Energy fell more than 14%.
Invesco Solar ETF Daily Chart