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  • Earnings
  • clean energy
  • solar

Will SolarEdge’s share price warm up post Q2 earnings?

SolarEdges [SEDG] share price has started to flicker back to life. Having started January trading at $321.8, the stock closed Friday at $259.48, an 18.7% decline (as of 30 Julys close). Yet, investors seem to be warming up again to the solar investment theme.

SolarEdges share price has accelerated 24% since 13 May, while rival Enphases share price [ENPH] has seen a 65% gain in the same period. On our thematic screener, the solar investment theme gained 2.8% last week, and is now up over 85% this year.

Helping the cause has been US President Joe Bidens $2.25bn infrastructure plan focusing on green energy, which includes a 10-year extension on solar tax credits.

With momentum back behind the solar investment theme, will SolarEdges share price continue to gain post-second-quarter earnings?

 

What could move SolarEdges share price?

An earnings beat could send SolarEdges share price higher. SolarEdge reporting quarterly results on Monday, is expected to post earnings of $1.12 a share, up from $0.97 seen in the same quarter last year. Revenue is forecast at $454.69m.

SolarEdge guided for revenue between $445m and $465m, with Non-GAAP gross margin expected to come in between 32% and 34%. Solar product sales are expected to form the bulk of revenue in the quarter at $405m to $420m.

$454.69million

SolarEdge's forecasted Q2 revenue

  

Last quarter, SolarEdge narrowly missed analyst expectations, delivering earnings of $0.98 a share against an expected $0.99. In the three quarters before the miss, SolarEdge had delivered a beat, with fourth-quarter 2020 earnings coming in at $0.98 a share against an expected $0.86 a share.

SolarEdge has said it expects commercial installations to increase in the second quarter, with commercial shipments improving globally. Other growth drivers for SolarEdge include geographic expansion - it has a presence in around 130 countries - growing market share and increasing average revenue per installation (ARPI).

 

Where next?

SolarEdge is banking on a global increase in demand for energy. According to its first-quarter investor presentation, energy consumption per capita is expected to increase 23% by 2050. Between 2015 and 2050 solar energy generation is expected to increase by a factor of 60. At that point, almost a third of global electricity demand will be supplied by renewable energy.

Missing earnings expectations last quarter hit SolarEdges share price. The company blamed it on higher costs. However, David Miller, portfolio manager of the Catalyst Insider Buying Fund, told Barrons in May that the disappointing earnings hadnt changed SolarEdges longer-term potential.

Estimates suggest that the companys earnings will grow at a CAGR of 24% over the next three years, with profit margin increasing to 16%. Then theres President Bidens promise to invest billions in clean energy which could have a rub off effect on the company.

“Its almost like a duopoly where its SolarEdge and Enphase. As long as their technology is better, they should both be able to maintain strong growth and margins” - David Miller

 

SolarEdge leads the market with one other competitor - Enphase - and is therefore in a good position to benefit. The company will also start shipping a battery product, opening up an additional revenue stream that Miller suggests hasnt been factored into earnings estimates.

Its almost like a duopoly where its SolarEdge and Enphase,” Miller said. As long as their technology is better, they should both be able to maintain strong growth and margins.”

Among the analysts, SolarEdges share price has an average $296.20 price target - hitting this would see a 14% upside on Fridays close.

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