Shares of Israeli solar power inverter manufacturer SolarEdge Technologies (SEDG 12.40%) tumbled 15% through 11:45 a.m. ET on Wednesday after the company reported mixed earnings last night.
On the one hand, SolarEdge beat expectations, reporting a loss of only $0.92 per share where Wall Street analysts had predicted a loss of $1.33. On the other hand, sales for the fourth quarter of 2023 came up a bit short. Wall Street had wanted to see sales of $323.3 million, but the most SolarEdge could muster was $316 million.
NASDAQ: SEDG
Key Data Points
SolarEdge Q4 earnings
Those are the bare facts, but they might not give a real sense of how truly awful Q4 was for SolarEdge. Q4 2023 sales simply collapsed, falling 65% in comparison to Q4 2022. Gross profit margins on those sales flipped from positive 20% to negative 18%. On the bottom line, SolarEdge lost a staggering $2.85 per share, versus earning a $0.36 per share profit a year ago.
All in all, it was a miserable end to a year that up until now wasn't looking nearly as bad. For all of 2023, SolarEdge suffered only a 4% decline in sales (to $3 billion) and enjoyed a gross profit margin that, although weaker than in 2022, was at least positive (24%). Ultimately, SolarEdge still managed to end the year with a generally accepted accounting principles (GAAP) profit of $0.60 per share, though even this number was down 64% year over year.
Is SolarEdge stock a sell?
So what went wrong for SolarEdge, and can management right the ship in 2024? CEO Zvi Lando noted that SolarEdge enjoyed "record installations and expectations for continued growth" in the first half of 2023, and he blamed higher interest rates and lower power prices (making solar power less attractive as an alternative energy source) in 2023 for slowing sales and causing inventories to build up.
Sad to say, this situation continues, and it's going to take SolarEdge a while to return to form as its customers work through accumulated inventories. In Q1 2024, management forecasts sales of no more than $215 million -- down at least 77% compared to Q1 2023 -- and gross profit margins are probably going to be negative, albeit only in the single digits. This more or less guarantees that the company will continue losing money in the coming quarter. (Analysts forecast a loss of $0.70 per share).
Wall Street still thinks SolarEdge can pull out a profitable 2024, with earnings of perhaps $0.76 per share. That still leaves the stock trading for nearly 100 times forward earnings, however -- and gives investors little reason to want to own SolarEdge stock for at least the next 12 months.
