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SolarEdge (SEDG) Down 10.8% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for SolarEdge Technologies (SEDG). Shares have lost about 10.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is SolarEdge due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

SolarEdge Q3 Earnings Beat Estimates, Revenues Up Y/Y

SolarEdge Technologies reported third-quarter adjusted earnings of $1.45 per share, which surpassed the Zacks Consensus Estimate of $1.38 by 5.1%. The bottom line improved 19.8% from the prior-year quarter’s $1.21.

Barring one-time adjustments, the company posted GAAP earnings of 96 cents per share compared with 83 cents in the year-ago quarter.

Revenues

SolarEdge’s revenues of $526.4 million in the third quarter missed the Zacks Consensus Estimate of $530 million by 0.6%. However, the top line surged 56% from the year-ago quarter’s $338.1 million.

Revenues from the solar segment were $476.8 million, up 53% from $312.5 million in the prior-year quarter.

Operational Highlights

SolarEdge shipped a total of 1.9 Gigawatts (AC) of inverters in the reported quarter.

Adjusted gross profit totaled $179.1 million, climbing 58.2% from the prior year’s $108.1 million.

Adjusted operating expenses flared up 32.7% year over year to $83.8 million.

Adjusted operating income during the quarter totaled $95.2 million, up 90% from the year-ago quarter’s $50 million.

Financial Performance

SolarEdge had $526.6 million of cash and cash equivalents as of Sep 30, 2021, down from $827.1 million at the end of 2020.

Cash flow from operating activities amounted to $124.6 million for the nine months ended Sep 30, 2021, down from the prior year’s $195.4 million.

Long-term liabilities were $1,009.2 million at the end of the third quarter compared with $915.3 million as of Dec 31, 2020.

Q4 Guidance

For fourth-quarter 2021, SolarEdge expects revenues to be $530-$560 million. The Zacks Consensus Estimate for the same is pegged at $546.9 million, slightly higher than the mid-point of the company’s guided range.

Revenues from solar products in the fourth quarter are projected to be $490-$515 million.

While the company’s non-GAAP gross margin is estimated to be 30-32%, gross margin from the sale of solar products is anticipated to be 31-34%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -15.77% due to these changes.

VGM Scores

Currently, SolarEdge has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, SolarEdge has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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