othalan: Cheap oil means less incentive for people to pay the high up-front costs to get into solar energy.
Neil: othalan, can you elaborate on this? I have yet to receive a call from my electric company telling me my rates are going down because the price of oil is down.
Neil, I may be wrong, but here is how I see it: (FYI, I am NOT invested in SEDG but have been considering it as an investment)
You are right that electric bill are probably not falling because most of our electricity in the USA comes from coal, natural gas and nuclear power plants. Here are some numbers I found:
Coal = 39%
Natural gas = 27%
Nuclear = 19%
Hydropower = 6%
Other renewables = 7%
Biomass = 1.7%
Geothermal = 0.4%
Solar = 0.4%
Wind = 4.4%
Petroleum = 1%
Other gases < 1%
This explains why you have not seen a decrease in your electricity bill. However, this is the consumer point of view, not the irrational/bipolar Mr. Market point of view. Here are a few thoughts on why I am thinking that crude oil prices might be effecting SEDG in spite of the above numbers:
#1: Commercial Sales (power plants)
Initial investment costs are very low for creating energy from petroleum but very high for solar energy. With falling oil prices I can easily see investors being worried that power plant companies will stop investing in new solar plants simply because it is (for now) far more economical to get energy from petroleum. For these commercial sales of solar panels the absolute numbers for energy generation are irrelevant, only the relative size of solar vs petroleum.
Given how much oil is being discussed lately in the media, I can easily see this causing investors to be concerned that SEDG commercial sales will be decreasing as the price of crude oil continues to fall. I have no clue how big a real effect this will have on sales.
#2: Residential Sales
Looked at factually, I see no possible reason for low oil prices to effect residential solar energy related sales. Petroleum based power plants could double energy output and barely touch residential energy bills. This means the profitability equation for solar is virtually unchanged. However, market reactions like today’s are based more on emotion (hope and fear) than on such facts.
Lots of irrational views could come up that may be linked into SEDG trading. Just speculating here: “The media says falling oil prices are scary for the economy, oil is linked to energy, SEDG is linked to energy, thus falling oil prices are bad for SEDG!” OR: “Oil is used to generate energy, oil is falling in price, energy must therefore get cheaper, solar energy will no longer save money, thus SEDG sales will fall!” Facts such as the above numbers are irrelevant to this type of irrationality.
#4: Short Investor Memories
The Exxon and BP earnings releases reminded people of the falling oil prices. It could be any concerns related to the above are already factored into the SEDG stock price. However, the market as a whole seems to me to have a short memory for how it has reacted to past events and tends to react to big events multiple times when reminded of what is happening in the world.
Those are my best attempts at guessing a rational for the huge drop in SEDG today without any company specific news. #1 has some factual basis, but I really have no clue if it will have any impact on SEDG specifically.
There you have my VERY inexpert guess at today’s price drop.
Hmm, all this makes me think today might be a good entry point into SEDG …