On Tuesday, Citi maintained its Neutral rating on SolarEdge Technologies (NASDAQ:SEDG) with a stock price target of $71.00. The firm highlighted several key developments for the company, including the announcement of a private offering of $300 million in Convertible Senior Notes due 2029. The proceeds from this offering are expected to be used in part to redeem the company's 2025 notes.
In addition to the notes offering, SolarEdge reaffirmed its second-quarter guidance and provided a free cash flow (FCF) outlook for the quarter of negative $150 million, which is substantially lower than the consensus estimate of positive $110 million.
The company also disclosed a potential loss of approximately $11.4 million related to the bankruptcy of Titan Solar (PM&M Electric) through losses on a secured promissory note.
Citi's commentary noted that the reiteration of the second-quarter guidance and the issuance of convertible notes, rather than common equity, alleviate some of the near-term risks that investors have been worried about.
Still, the firm also pointed out that the issuance of convertible notes coupled with a lower forecast for free cash flow in the second quarter, due to poorer cash conversion and the ramp-up of manufacturing in the U.S., suggest that 2024 could be a challenging year for the company in terms of cash generation. This is despite SolarEdge's initial expectation that inventory reduction would contribute $500 million to free cash flow over the course of the year.
The overall analysis by Citi anticipates a negative market reaction to these announcements from SolarEdge Technologies.
In other recent news, SolarEdge Technologies has been the subject of several adjustments in stock price targets by various analysts. Scotiabank has reduced its price target for SolarEdge to $46 due to concerns about cash flow, while Canaccord Genuity cut its target to $38 citing concerns about inventory saturation in the inverter sales channel.
On the other hand, RBC Capital has maintained a Sector Perform rating on SolarEdge with a steady price target of $71.00. Wells Fargo (NYSE:WFC) reduced the target to $62.00 due to lower than expected product sell-through and margin projections, while Susquehanna downgraded the stock from Positive to Neutral and slashed the price target to $56.
In addition to the forecast adjustments, SolarEdge announced a $300 million convertible note offering, set to mature in 2029. The proceeds are intended to address the company's fiscal year 2025 maturity obligations. These are recent developments that provide a snapshot of SolarEdge's current market position and the broader industry dynamics.
Furthermore, the US solar industry, including SolarEdge, is preparing for a potential surge in solar installations, following the expiration of a tariff holiday on solar panels from Southeast Asia. This development will require developers to utilize approximately 35 GW of duty-free imported panels stockpiled in warehouses before the year's end. The reinstatement of these tariffs could accelerate the pace of project construction.
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