SolarEdge (NASDAQ:SEDG) shares declined more than 5% in premarket trading Tuesday after Jefferies analysts downgraded the stock to Underperform from Hold, citing negative takeaways from the recent RE+ clean energy event. The investment bank also lowered the price target on the stock from $27 to $17.
“We had initiated on SEDG with a Hold with hopes of gaining more confidence coming out of RE+. Unfortunately, that didn't pan out,” analysts note.
“What we heard was a longer-than-expected muted outlook in Europe, and while the US is recovering, there is still stiff competition.”
Based on discussions at RE+, Jefferies further lowered their average selling price (ASP) estimates and are now 13% to 15% below consensus for 2025 and 2026, with a projected 14% year-over-year decline.
The current consensus expects ASPs to decline in the low single digits, while management had previously indicated high single-digit to low double-digit declines. Given the significant premium that SEDG inverters trade at compared to their Chinese counterparts in Europe, Jefferies expects the ASP declines to be more severe, potentially exceeding a 10% drop.
Although there may be some upside in U.S. ASPs due to domestic content, Jefferies expects this to be largely offset by other factors.
As of the second quarter, Europe accounted for 37% of SolarEdge’s solar sales, down from 64% in 2023.
Looking forward, the investment bank anticipates Europe’s contribution to trend toward 30%, while still remaining a significant part of the company’s business.
Analysts expect that SolarEdge will remain EBITDA negative in 2025, projecting a loss of $144 million compared to the consensus estimate of a $23 million gain.
In discussions during the RE+ event, interim CEO Zvi Lando mentioned targeting positive EBITDA by the second quarter of 2025. However, Jefferies remains skeptical and believes the market is overly optimistic about the second half of 2025. For 2026, Jefferies estimates EBITDA at $107 million, which is roughly 50% below current consensus expectations.
“Until SEDG achieves positive EBITDA, it will need to carefully manage its cash burn as it tries to monetize its $1.5bn inventory. Our analysis of SEDG's app download data indicates little recovery in US, despite steady permitting data,” analysts continued.