I was just looking over the numbers for the last couple quarters for ENPH and SEDG.
SEDG's cost per watt (AC) has dropped from .35 cents to 34 cents to 32 cents the last three quarters....about 8%.
ENPH cost per watt (AC) has dropped from .53 to .52 to .47 cents the last three quarters....about 12%.
Not a big difference the way I see it.
In that time SEDG's revenues jumped from 86M to 115M...33%
In that time ENPH's revenues jumped from 86M to 102M.....15%
If you just take those number it's hard to understand why ENPH felt it had to drop prices to what appears to be
in the 30% range in just one quarter.
It also appear the max production ENPH can come up with is about 1M micro inverters per quarter.
Which again, since they are so close to that number (they did 950K last quarter) begs the question why go all in now?
If ENPH does get a 30% jump in sales all they are going to be doing is wiping out a few weeks of inventory since they won't have increased production capability for at least another year (and maybe two going up to around 1.4M).
SEDG just jumped Optimizers sales from 950K to 1.45M....and I suspect they are maxed out at that number (inventory increased last quarter but A/P dropped).
Both companies outsource to Flextronics, who appears to build the plants and hire the workers while ENPH and SEDG install their own equipment and come up with their own designs.
What I thought at first was this dramatic price move from ENPH was designed to crush SEDG...kick them in the head and let them know who's the boss.
But ENPH does not have the production capability (yet anyway) to grow much faster then a 25% rate. Which begs the question why try to steal/crush SEDG in one fell swoop when you don't have enough product to cover those increased sales anyway?
All you are doing is hurting your own profit numbers.
Which leads me to conclude this is a one time move from ENPH and they'll increase prices right back up again after they bleed off 20M in inventory.
The war will be over when prices stop dropping....in the meantime it's all just battles (that SEDG has been winning).
Last quarter SEDG dropped prices from .34 cents per watt to .32 cents.
ENPH dropped from .52 to .47.
ENPH just guided revenues from 102M last quarter to 65M (middle) this quarter....yet the rate of installs is increasing (you can track this on their web site...just google "enlighten public installations"....and so far it appears it's up around 5% this quarter).
What this means is that if wattage goes up 5% and sales drop 35% then their price per watt is going to come
down in the 40% range.
In the last C.C. the CEO of SEDG said the same thing the CEO of ENPH was saying three quarters ago.....the competitive landscape remains the same and he expects price erosion in the 2% range for the quarter and 7-10% for the coming year.
If you read SEDG's website it states one of the advantages of Optimizers is they are half the price of micro inverters...and they were two years ago.
Last quarter that number was down to about 50% (32 vs 47).
This quarter is appears as if that number is going to zero.....and the CEO of SEDG is going to be seriously wrong.
So I guess in that sense the price war will be over....meaning we are about to find out
if Optimizers can really compete with micro inverters without a price advantage.
I suspect the tide last quarter was already starting to turn. SEDG's A/R jumped nearly 30% last quarter and inventory jumped 10% while A/P dropped 10%.
Those numbers were similar to ENPH two quarters before the #$%$ hit the fan.
The only reason to replace the CEO of TERP is because he wouldn't go for the deal SUNE was trying to shove down his throat....so he had to go.
The bad news is it won't be the last time TERP is forced to swallow.
I think both techs work...it's just a price thing.
This is what SEDG's web site says why buy their products over micro inverters:
"On an average system, Microinverters will cost twice as much as a comparable solution powered by SolarEdge"
And this was true for most of the last two years...which is why their sales rose so rapidly (and the fact they jumped on the SCTY ship).
But that is changing rapidly.....
Last quarter is was .32 to .47 per watt.....about 50% (cut in half).
But even at that number SEDG seems to be winning as ENPH just caved on prices.
We'll have to wait for next quarter's sales numbers to see how the trend is playing out....but right now
it looks like that difference is going to be cut in half again in just one quarter.
Pretty clear at double the price SEDG is the winner....and even at 50% of the cost (last quarter's number).
But what is also clear is ENPH is closing the gap.
So the question becomes what price premium (if any) will users pay to buy ENPH over SEDG?
ENPH has stated their goal in two years is to be at 10 cents a watt with 40% margins.
SEDG has stated they expect average prices to drop 7-10% a year and their margins will steady (or increase a bit) at that price erosion.
When asked what will happen if ENPH is successful and really gets below the price of string inverters the CEO of SEDG stated it has never happened in the past so he doesn't expect it in the future.
Well, if he's right you can stick a fork in ENPH.
If he's wrong you can stick a fork in SEDG.
SUNE already canned any management at TERP that wasn't willing to trade at market prices to protect their shareholders.
SUNE wanted to force that deal down their throats at a price that benefited SUNE.
At this point it's clear SUNE tanks so will GLBL and TERP.
The recent management changes made that clear.
So in the end it really doesn't matter what stock of the three you buy....they are now tied at the hip.
The only real chance TERP and GLBL has is if SUNE declared BK and reorganized....which would get them out of the VIviant deal without penalty also.
SUNE shareholders will get wiped out...but at this point they would not take TERP and GLBL down
But their recent actions suggest they'll milk the other two until the end...meaning they either sink or swim together.
Place your bets.
The last thing the CFO wants is ENPH to be sold or bought out....because the first thing the new buyers will do is dump the CEO and CFO.
I don't think either one of them realize the precarious position they've gotten themselves into.
Once you've so disillusioned shareholders they've abandoned your company in mass causing the share price to trade around net asset value (zero value for future profits or tech) you open your company to being "picked off".
Picked off is not a good thing for long term holders or management.
But in the real world that's how it plays out...the strong eat the weak.
My hope is if this does happen it's SEDG doing the picking...with shares (that way we can at least get something for our troubles.....SEDG's share price will double after the deal goes through). While IMO they are clearly the inferior company and the markets will eventually realize it...doesn't matter today.
Today ENPH has bum leg and a lion checking it out. Doesn't matter if the leg will heal someday...the only thing that matters is if the lion is hungry or not.
"Absolutely. But why clip at all when you have other alternatives?"
For me I just felt the extra 1000 dollars (30 micro inverters and around 35 dollars to upgrade) it cost to upgrade to the M250 was not worth the money for the tiny amount it would be clipped.
To go away from micro inverters would have been insane IMO.
Just read SEDG's paper where the tout their new "HD Wave" inverter.
What it states is how much of an antique they were previously selling (30 year old expensive, inefficient, non reliable tech....central inverters).
Why the heck would I want that in my garage just waiting to fail?
And it also begs the question if they were pushing that junk as hi tech why believe them now?
Compare that to ENPH new generations of micro inverters. ENPH does not bash their previous M250's or M215...they just state the new generation will cost less, be smaller and handle more watts.
Not that what I put on my roof last year is antiquated junk which is pretty much what SEDG is stating about their central inverters.
I don't know about that...but it's very clear ENPH's engineers think SEDG's new HD wave inverter is a scam.
While SEDG claims it is revolutionary ENPH claims it's old tech already discarded because of reliability issues.
Reliability issues was the reason ENPH tanked from 8 to 2 back in 2012, so it's a good reason to keep an eye on warranty obligations on the balance sheet.
Last quarter they increased a similar percentage to sales...meaning the new ones being sold aren't any better than those sold by SEDG years ago (the good news being they aren't any worse).
ENPH loses the stock price battle with SEDG, but on the reliability front they are the clear winner. Even though their actual product sales increased 10% last quarter (revenue was flat because of declining prices) warranty obligations declined 10% (meaning reliability has increased with newer generations).
As a side note today's move by SUNE to replace independent board members at TERP with SUNE employees signals the beginning of the end for SUNE...at least for equity shareholders.
So what's the difference between the business models of SUNE and SCTY?
Give Paul some credit.
Sure, he spend every dime ENPH brought in with their highest in the industry margins. But at least
he didn't bring in debt to start any projects.
If he did we'd all be worried about BK right now.
There is simply no way ENPH is going to stay with a 70M market cap and not get picked off by someone...cheap.
Most of the major players stock prices move their market cap that much every single day.
I'm not sure Nahi realizes the situation he's put not just the company in but himself.
I haven't found any golden parachutes set up yet. Bet they're coming.
"STC = Standard Test Conditions = The DC nameplate rating that you see on solar panels (i.e. your 260 watt panels). Namely, the amount they will produce when flashed with 1000W/sq meter at 25C."
So is 1000W/sq meter what you get at the equator at noon? I thought that was the standard for solar panels?
Nahi stated a 300 watt micro inverter could handle a high 300 watt panel and a M250 could handle a 300 watt panel.
I guess 85% is about the right number then for most parts of the planet.
"It is getting close to the point where I may go long. Although I don't like the product or the company it is starting to look like a decent short-term trade."
I bought TCPI recently for the same reason when it tanked because they delayed their accounting release.
I hate that company...borderline crazy CEO who the BOD just kicked out yet he still owns 30% of the company.
Still, at just over 80 cents and a major player in LED lightening...in both Walmart and Home Depot....I just had no choice but to buy some...nose closed.
No idea why it went up today...don't care (I sold).
Plenty will do the same thing with ENPH.
I have no issue with that.....I'm just going to hang out here until my thesis (ENPH took four or five years but came to dominate the micro inverter market..98% market share....and in four or five years they'll will do the same thing to the over all inverter market) proves right or wrong regardless of where the share price is.
At this point SEDG can't stop this from playing out...but once the share price gets this cheap it ends up with shareholders like you who will sell at a 30% profit tomorrow.
And that's why CEO's not on the ball can spell their own doom.
Check out KBIO the last week as an example. Stock dropped to a market cap of 4M (yet had about 10M in net assets along with the value of two early stage drugs that could be sold off) and that loser nut got his friends to pony up 3M and he borrowed 10M to buy 80% of the company.
End of the current CEO
I doubt that. TV manufacturers have been selling to competitors for years.
Also, who else is going to have a micro inverter the size of a cell phone that handle a nearly 400 watt panel?
One question. A the analysts day it was mentioned solar panels are rated in D.C. while micro inverters are rated in A.C.
I didn't really understand that.....but they stated that's why a M250 can handle a 300 watt panel without losing any production.
I know my M215's are fine matched with 260 watt panels.
So what the difference between DC and AC ratings?
No relationship...but crazy all the same.
ENPH has a net value of 50M on their balance sheet.
With a price approaching that it's pretty much assigning zero value to their 500 patents.
SolarBridge had zero assets yet sold for 105M because of their tech...that no one bought (ENPH owns
about 98% of the inverter market).
The thing is....the danger when your share price is just crushed AND was on huge volume you have a lot of new shareholders that will take a buyout offer not far from where the current price is.
It's called getting picked off.
Management hates this as they mostly lose their jobs, but it's the way capitalism works (the strong eat the weak).
I'm all for a buyout by SEDG, but only with stock (because it's going to go straight up after the buyout if concluded).
But if SCTY or SunRun or SolarWorld jumps in with a 200M cash offer how is ENPH going to fight that off?
SEDG would also be hit in that case....because now poor ENPH would have deep pockets and marketing muscle.
If you were one of those companies contemplating integrated panels why not just spend a few bucks and buy the whole company instead of paying them for years going forward?
Bottom line: The BOD isn't going to fire the CEO or CFO. It's going to be the company that buys them for chump change and they'll have no one to blame but themselves.
I'll tell you what the analysts are looking at.
Normally when you see a high tech company that just announced the sales will drop from 100M to around 65M in just one quarter but tell you not to worry, they have initiatives in place to turn everything around, you run for the nearest exit.
Because if current generation products aren't selling the odds are the next one isn't going to do any better (designed by the same guys that came up with first generation that no one likes).
So what's different here?
Lost in the revenue numbers are the fact their products (micro inverters) are not only selling, but selling very well.
Actual inverter sales increased 10% sequentially just last quarter.
So the market is there, you just have to figure out how to make a profit of it.
So what's the trend there?
In the past ENPH has been able to lower costs on average about 15% a year.
So now they're going to up that to 25%.
Makes sense to me, since they have over 200 engineers on the payroll and I'm sure a good portion of those were assigned to the battery design team....can now be reassigned.
So ENPH has a shot...their products are still cutting edge and in demand and it's a lot easier to fix cost then create market demand.
I was also thinking of why they never made a deal with SCTY in the past. I used to think it was SCTY that shunned them but then when I heard the production numbers a different story came to mind.
SCTY is huge. SEDG exploded because of them (over 30% of their business...which has been growing over 100% year over year for 5 years now). They would have wanted a discount and over 300K micro inverters per quarter...and growing.
If you were the CEO of ENPH and were selling every micro inverter you could produce why discount them and place your company at risk to a 30% customer (like SEDG did)?
Remember ENPH, if I heard right, can only produce about 1M per quarter. They are working to up that to around 1.4M...but that's not the case today.
I just dug up the info on Goldman Sachs US Emerging & SMID Cap Growth Conference.
It states ENPH cancelled.
Wonder why that was?
It was supposed to be at 2:30.
I'm going to guess the CFO phoned in early and Goldman Sachs notified the world tanking the stock for the day.
Don't think it's a big deal...they just yapped for 3 hours the other day.
It's got to be tough though to go before a group of sophisticated investors and pump a company that's lost 90% of it's market cap in the last 9 months.
It still goes on for a few more days...maybe they'll reschedule...but it does say "cancelled" on the web site.
Yea, I heard every word of it.
Then I went and read up on what SEDG is saying about it.
To them it's visionary. They are going to change the future of central inverters.
We'll find out soon enough if they're junk.
With ENPH those junky M190 caused an immediate jump in warranty obligation and complaints flooded the
internet back in 2012.
Last quarter SEDG's warranty obligations jumped 10% sequentially....but I don't think those new
wave inverters are selling yet.
It's funny how SEDG's states how superior the new ones are compared to the old ones....which they pretty list as 3 decade old junk..compare them to vacuum TV sets.
Well, a year ago they were touted as vastly superior to ENPH's micro inverters.
Now we learn state what ENPH has always stated....they're expensive antiques that will fail early and often.
So anything SEDG states you have to take with a grain of salt.
Nahi has been wrong on the markets but I've never know him to be wrong on his products.
As a side note Woody always accuses me of being in love with ENPH so I view it with blinders on.
Well, maybe. But I've owned stocks I've lost 90% on initially that turned into huge winners for me in the past.
I remember one that I bought that had dropped from 15 down to 2...and it continued all the way down to .10 cents before turning around and going back up above 10.
The reason they survived is they had great tech, no debt and enough cash to see through their rough patch.
I just see that with ENPH.
Just hope it doesn't go to 10 cents...but you never know.
Markets are nuts sometimes.
ENPH has spend more in the last two years on R&D than the current market cap...and rapidly approaching one year.
Name another high tech company that shares that distinction?
BTW, where the heck is the link to that conference the CFO was at today? Did he not show up?
While that is nice jump from Q3...they need to get over 990K for the quarter because that is what they have contracted for.
With Q1 being seasonally soft I think their hand was forced to get inventory under control now. That meant one time deals on micro inverters.
I still don't know if those prices will stay low once the inventory is gone.
I'm going to guess it depends on how much price reductions actually effected sales.
Nahi stated they were taking back market share but didn't elaborate and no one followed up since they probably didn't believe him in the first place after giving horrible guidance just two weeks previous.
I also suspect the reason Nahi never lowered margins previously is they were on a trajectory to sell every singe micro inverter they were making (950K last quarter and increasing 10% sequentially).
I just think SEDG finally hit the sweet spot of pricing (continued to lower prices) while ENPH stayed high forcing
The good news is this gives plenty of solid metrics to plug into a price analysis formula. Normally 90% of that is just guessing, but if you have real historical data (not just market guesses) to back it up you can plan with much more confidence (commit greater resources with confidence).
Since it looks like ENPH has to commit early in the year for the entire year that is a big deal (guessing wrong is what got them elevated inventory and A/R in the first place).
If you read about SEDG's new HD wave inverter it's a revolutionary new product. They claim it will change the market just as flat screen TV's did with their introduction back in 2000. This what Roth stated last month about it:
"Roth Capital affirms its Buy rating and $40 price target on SolarEdge Technologies (Nasdaq: SEDG) following recent investor meetings with CFO Romen Faier.
Analyst Philip Shen sees SolarEdge's Gen3 inverter giving the company the ability to reach string inverter parity within the next two years.
Shen offered the following commentary:
The Gen3 inverter lays the foundation for a revolutionary step in margin expansion. The new inverter is less than half the size and half the weight of the latest generation, which directly translates into a much lower cost structure. The residential version is set to be released toward the end of 2015 in the U.S., while a version addressing the commercial segment is expected to be introduced mid-2016. Benefits from the new inverter technology are expected to be "revolutionary" according to management. Even after baking in ASP erosion, the improvement in margins could be in the tens of percentages. That said, it will likely take at least three or four quarters to ramp-up to full production.:
Then compare that to what ENPH said about SEDG's new tech the other day....basically it was old tech repackaged that has seriously reliability issues.
So which is it?
Got me....I just think it doesn't matter what SEDG does it only matter what ENPH does. SEDG stated the inverter market will see price ASP price erosioin of 7-10% in 2016 while ENPH says they'll cut costs 50%.
Only thing for sure is SEDG"s market cap is approaching 10X ENPH's....meaning the markets think ENPH is blowing smoke and SEDG will be the ultimate winner in the price war.
And that opinion in now shared with every analyst.
I agree with everything you posted.
But if you look it's trading at it's 52 week low.
That means it's a target for tax loss selling.
And that's my guess as to why it's trading so low.
But it's still in it's range over the last couple years. There is no
technical damage being done from a trading standpoint.
The mystery to me is why the market has totally disregarded the HLSS purchase
when they initially loved it (12 to 17 run).
Even if you think it won't help dividends it provided another revenue stream.
It also wasn't done with debt...it was equity raised at a much higher price.
Just a thought, but maybe it wasn't the HLSS purchase that moved the share price but pumping
by firms to get a larger commission on the sale of the stock?
I go looking every year for stocks trading at or near 52 weeks lows. Most will get a 20% bounce or so the first couple weeks of Jan. It's more a small cap thing....I've never done it will large caps.
I think it's why the NASDAQ always seems to have a good Jan...even the dogs move up for this reason.
The last time ENPH hit sub 2 (2012) it started moving up by the last week of Nov. That is earlier then
most of those that I follow. Most stay low until the 2nd week of Dec before moving up.
Analysts price targets are based on P/E's and growth rates....for established companies.
It's a worthless metric for ENPH.....didn't work for Roth at 20 and won't work at 1.90
No one has a clue what ENPH will do for revenues in 2016 anymore than they did in 2015.
Roth gave them a P/E around 20 and thought they'd make a dollar a share in 2016....equals 20 dollar price target.
Now they think they'll lose nearly 30 cents in Q4 of 2015 and make a few pennies in
2016....give them the same P/E and you get 1.90.
My view is forget about next year and think of ENPH as a biotech stock with a drug up for FDA approval in a
couple years that could dominate a 7B market.
Small biotech stocks are very volatile. 1000% moves are common.
I've been trading in and out of AVXL the last month or so. It's gone from .15 cents to 15 dollars
in the last 12 months....dropped 80% in a couple weeks and now is moving up again.
Same product...but one small study and the entire perception of it changed (still at least two years away
from any real results so I'm don't courage anyone to buy it).
ENPH needs to show the market the potential of it's tech and clearly analysts day didn't work.
What they need is to show they can take market share back from SEDG.
Once that happens the perception will change.
If they wanted to impress the analysts all they had to say was...our new pricing is working and
we are taking back market share.
A low stock price has lots of negative ramifications so it's best if it doesn't trade at this level for long.
They don't need cash (major dilution to raise when your stock price is depressed) or loans (already have a 50M line of credit) so neither of those is a worry.
The worry is you get picked off cheap. SolarBridge sold for 105M and they were not 1/10 the company of ENPH.
Pretend SCTY decides micro inverters are the future. Why buy them one at a time when you buy the entire company for the same price as a couple years sales?