Energy
Friday, October 20th, 2023 2:07 pm EDT
Key Points
- Solar stocks experienced a significant decline in value after Solaredge, a solar product manufacturer, warned of weakened demand in Europe. The Invesco Solar ETF (TAN) fell by 26.7% on Friday, reaching its lowest level since July 2020, and other solar stocks, including Sunrun, Sunnova, and Enphase Energy, saw substantial declines.
- Solaredge’s announcement of lower-than-expected revenue, gross margins, and operating income for the third quarter, along with expectations of significantly lower revenue in the fourth quarter, contributed to the negative sentiment. The CEO, Zvi Lando, attributed these issues to substantial unexpected cancellations and delays in backlogs from European distributors due to high inventories and slow installation rates. Installation rates in the third quarter were particularly slow toward the end of the summer and in September.
- While the solar sector was already facing challenges in 2023 due to rising interest rates affecting U.S. solar installations, Solaredge’s pessimistic outlook further fueled concerns. Goldman Sachs double-downgraded Solaredge from “buy” to “neutral,” emphasizing that the weak demand environment in Europe raises questions for the company’s outlook in 2024 and indicating broader issues beyond seasonal fluctuations. Analyst Brian Lee noted concerns about ongoing inventory, end-market demand, and margin problems that are likely to hinder the stock’s performance in the foreseeable future.
The solar industry faced a significant decline in stock prices after solar product manufacturer Solaredge issued a warning about weakened demand in Europe, adding to the challenges the renewable energy sector has already faced this year. The Invesco Solar ETF (TAN) plummeted by 26.7% on Friday, reaching its lowest level since July 2020, and other solar stocks, including Sunrun and Sunnova, saw declines of 12.5% and 14.3%, respectively. Enphase Energy dropped by nearly 12%.
Solaredge, which fell by 30%, announced that its third-quarter revenue, gross margins, and operating income would be below Wall Street’s expectations, and it estimated “significantly lower” revenue in the fourth quarter. The CEO cited “substantial unexpected cancellations and pushouts” of backlogs from European distributors due to high inventories and slow installation rates, particularly in the latter part of the summer and September, when installation rates usually rise.
Despite ongoing challenges, Solaredge’s adjusted guidance was stated to be unrelated to the Israel-Hamas war, and its manufacturing remained uninterrupted. The solar sector has already faced difficulties in 2023 due to rising interest rates affecting the financing environment for U.S. solar installations. SolarEdge and the TAN ETF were down 59.7% and 35.9% year-to-date, respectively, as of the previous day’s closing.
Goldman Sachs double-downgraded SolarEdge from “buy” to “neutral,” citing the weak demand environment in Europe as a larger issue than just seasonality and posing questions for the company’s outlook heading into 2024. The combination of inventory, end market demand, and margin issues is expected to be a significant challenge for SolarEdge in the foreseeable future, according to the firm’s analyst, Brian Lee.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/10/20/solar-stocks-tumble-to-3-year-low-as-solaredge-drops-25percent-on-demand-warning.html
