SEDG - Embedded Expectations Analysis - 2020 12 22
SolarEdge Technologies, Inc. (SEDG:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 76.7x Uniform P/E. Even at these levels, the market has bearish expectations for the firm, and although management's concerns about revenues, gross margins, and sell-through rates suggest the potential for near-term headwinds, market expectations are overly bearish, suggesting longer-term equity upside is likely going forwardSpecifically, management may lack confidence in their ability to generate revenue in the e-mobility market, maintain the revenue growth of their solar business, and mitigate total revenue declines. Moreover, they may lack confidence in their ability to sustain GAAP gross margins, manage the increase in workforce and expenses in Italy, and get past the ramp-up phase of the Sella 1 factory. Furthermore, they may be concerned about the performance of their newly released optimizer series, the production process of the powertrain, and the longer lead time in resuming the sell-through of distributors
Although management's concerns about revenues, GAAP gross margin, and sell-through rates suggest the potential for near-term headwinds, market expectations are far too bearish given the firm's strong leadership position in a fast-growing market. As such, longer-term equity upside is likely warranted for SEDG
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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