Since I exited SolarEdge I hadn’t been following it, but the recent discussion about SEDG on the board got me to sit down and read the last quarterly report and the conference call transcript. For a summary of my thoughts:
Positive
Solar energy is definitely coming in the future.
SEDG is incredibly cheap with a PE about 9.
They are converting to a new better product.
Revenue, Net Income, Adjusted Earnings, and Gross Margins were all up year over year.
Negative
Revenue, Net Income, Adjusted Earnings, and Gross Margins were ALL DOWN sequentially.
It was pretty much the first that time ANY of them had been down sequentially.
This is a company that anticipates having to cut ASP’s 5% to 10% every year, because it makes a semi-commodity product.
Their American market, which is their biggest market, had sharply reduced revenue this quarter.
SCTY, which was one of their biggest customers is having a terrible time. I know that they said that SCTY is less than 10% of their revenue, but I think that’s deceptive. SCTY is less than 10% of their revenue because SCTY’s business has fallen off so much. They used to be lots more – and growing rapidly.
And SCTY is being taken over by Tesla.
And Elon Musk has been talking loudly about making their own inverters and integrating them in all their products. (They wouldn’t be the first solar company to do that).
New competition may be coming from Huwei, who may start selling Chinese low-price inverters in the US.
My thoughts
I don’t understand the pros and cons of the technology.
This is a company that does the same thing that other companies can do, and does it well, but:
A purchase of SolarEdge would be a short term speculation, hoping for a bounce from an apparent oversold position.
There are a lot of negative things happening.
I think I’ll pass for now.
Saul