SEDG and SUNW

Not much makes me happier than seeing two of my favorite companies working together.

http://seekingalpha.com/pr/16606079-sunworks-selects-solared…

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Bear,

SEDG has been getting hammered as of late and is looking very interesting to me. You follow SEDG as closely as anyone.

What required reading would you suggest for me? I can go back through the conference calls of course. However, if you have other sources of info or can point to some specific board posts, that would be very helpful.

Lastly, and you may have posted on this previously as well, but I was hoping you could run us through your bull thesis. Lastly, what can you tell us about the bear thesis and why you believe it is incorrect?

If you care to share, it would be appreciated.

Thanks,
A.J.

What required reading would you suggest for me?

AJ,

If you didn’t see this thread yesterday, you might start here: http://discussion.fool.com/sedg-32398262.aspx?sort=whole#3239843…

I especially like Foodles’ take. When you read the conference call, you’ll see that they were below what they expected last quarter, but they believe the lower demand was temporary. Solar is being adopted in fits and starts. Can’t expect every quarter to grow equally. But like Foodles, and SEDG, I believe more rapid growth will resume…maybe is resuming.

I think the CC from last quarter will help a lot. Here are some of my notes:

Guy:

We concluded this quarter below our expectations with fiscal fourth quarter revenues at $124.8 million, at the low end of our guidance, with gross margins above guidance at 31.4%.

As a general business strategy, we prefer profitability over revenue growth. …we did not reduce prices in an unnatural manner in order to increase revenues.

We remain highly focused on profitability and cash from operations.

Ronen:

Gross margins for fiscal 2016 were 31% compared to 25.2% in fiscal 2015.

And now, our guidance for the fiscal first quarter of 2017 is as follows. We expect revenues to be within the range of $130 million to $139 million and gross margins to be within the range of 30% to 32%.

Then the Q&A session addresses SolarCity, etc, like Foodles said.

I was hoping you could run us through your bull thesis.

First, I love their focus. They don’t seem to be doing what INFN was – trying to buy growth at the expense of profit (which didn’t even work). They have money in the bank and they’re improving margins as they can. They’re growing when the growth is there and trying to take more to the bottom line.

Second, the company is providing a reasonable explanation for what is going on, and still believes they will continue to grow. I read the comments from the CEO and CFO and they make sense.

Thirdly, and I hate to make broad predictions, but I don’t think it’s silly to expect that the solar industry will continue to grow. SolarEdge seems to be on the forefront, and they are actually a discplined and profitably run company – rare in this space. They are literally dirt cheap right now with a PE of under 9. NINE.

Lastly, what can you tell us about the bear thesis and why you believe it is incorrect?

I’m not sure I understand the bear case. Maybe that SolarEdge will be displaced? Certainly not that solar will go away. Innovation that replaces or makes obsolete SEDG’s offerings? I guess that’s just a risk we have to take as investors. Obviously I don’t understand the nuances of the technology. But I understand the reward potential if the bears are wrong.

If you care to share, it would be appreciated.

Happy to. Would love to hear others’ thoughts as well, bull and bear alike.

Bear

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