SEDG - Embedded Expectations Analysis - 2020 05 22
SolarEdge Technologies, Inc. (SEDG:USA) currently trades at historical highs relative to UAFRS-based (Uniform) earnings, with a 23.5x Uniform P/E. Even at these levels, the market has bearish expectations for the firm. Although management's concerns about revenue growth, operating expenses, and inventory levels suggest the potential for near-term headwinds, market expectations are overly bearish, suggesting longer-term outperformance for SEDG is likely going forwardSpecifically, management may lack confidence in their ability to increase net income, sustain total revenue and safe harbor revenue growth, and meet their operating expense run rate guidance. In addition, they may have concerns about negative customer mix pricing trends, their capex spending, and the financial stability of their customers. Furthermore, they may be concerned about distributor inventory levels and their ability to weather cyclical downturns. Moreover, they may be downplaying concerns about coronavirus's impact on the business, and they may have concerns about component shortages, supply chain disruption, and further order rescheduling and cancellations
Although management's concerns about revenue growth, operating expenses, and inventory levels suggest the potential for near-term headwinds, market expectations remain far too bearish, given the firm's strong leadership position in a fast-growing market. As such, longer-term outperformance for SEDG is likely warranted
SolarEdge Technologies designs, develops, and sells an intelligent inverter solution designed for power generation at the individual photovoltaic module level. The company's products consist mainly of power optimizers designed to maximize energy throughput from each and every module via constant tracking of Maximum Power Point individually per module; inverters, which invert direct current from the PV module to alternating current; a related cloud-based monitoring platform; and a storage solution that is used to increase energy independence and maximize self-consumption for homeowners by utilizing a battery that is sold separately by third party manufacturers, to store and supply power as needed.
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