SEDG Q2 EPS beat, 25% pop

Not sure if anybody on here still follows SEDG, I’ve been holding after reading about them on this board a couple years ago, sitting at a 120% gain currently. Obviously some of the more popular stocks on here have performed better, but I’m a very strong believer in solar and I also like to not be fully invested in only SAAS/Cloud companies (FYI my second best performer behind SHOP has been ENPH, sitting at just a hair under 500% gain).

SolarEdge reported $0.94 Non-GAAP EPS, beating estimates of $0.88. Stock was up over 25% today.

  • Revenues of $325.0 million, up 20% from $271.9 million in the prior quarter and up 43% from $227.1 million in the same quarter last year
  • Non-GAAP gross margin was 35.7%, up from 32.8% in the prior quarter and down from 36.5% year over year.

Margins are being affected by US tariffs, however, their Vietnam manufacturing facility is almost completed and are expecting their first shipments in Q3.

Warranty expenses are decreasing, which is helping drive margins. There has been talk in the past about SEDG’s higher failure rates compared to Enphase. This has concerned me a little, but hopefully these numbers continue to fall.

Despite the tariffs, US sales continue to increase and they have a two quarter backlog. This is after increasing manufacturing capacity by 25% this quarter alone. They expect to have increased expedited shipping costs for the next 2 quarters in order to meet growing demand, which has already been factored into forward guidance.

Sales in Europe continue to make up a larger total percentage, up to 48% this quarter, which is a positive IMO. There seems to be much larger emphasis on renewables in Europe, and the European solar market is growing faster than in the US.

They are also expanding into storage, which could add to their TAM considerably in the future. Energy storage is going to be crucial for continued renewable growth, for obvious reasons, and I think we’re just in the early stages of seeing a larger focus on storage solutions. SEDG is expecting to ship commercial and residential batteries by early 2020.

Bottom line: Solar has grown a lot over the last 10 years, but I strongly believe we’ve barely scratched the surface. According to Solar Power Europe’s 2019 report, global solar capacity could nearly triple by 2023. Tax credits are still in place in and some fear as these continue to phase out it will affect growth, but I don’t believe this will be the case as costs for solar continue to plummet. There was a recent article posted on the based on a presentation by NextEra Energy with estimates that solar and wind could cost the same as natural gas as soon as 2023, and once that inflection point is reached renewables could see exponential growth.

SEDG currently has a market cap of around $3B, with likely over a $1B in sales for 2019, almost 0 debt, and a forward P/E of 17. All while posting year over year quarterly growth of 40%