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Key Takeaways
- Bank of America upgraded SolarEdge Technologies, saying the solar power equipment maker will be profitable next year.
- BofA Securities added that the recent slide in SolarEdge’s share price was based on an “unlikely worst-case scenario.”
- However, the bank cut the price target, noting that the whole solar power industry continues to struggle.
SolarEdge Technologies ( SEDG ) shares surged in intraday trading Monday following an upgrade from Bank of America, which argued the solar power equipment maker will post a profit next year and said its stock is undervalued.
BofA Securities raised its rating to “neutral” from “underperform,” although it lowered the price target to $29 from $44.
The strategists said the recent drop SolarEdge’s share price is based on “an unlikely worst-case scenario of inventory writedowns, a lack of recovery in the inventory channel congestion through ’25 and an inability to monetize the balance sheet.”
BofA Expects SolarEdge To Return To Profitability Next Year
BofA noted that the European solar market faces “substantial inventory headwinds,” and that the company is seeing weaker end-demand in the U.S. However, while the bank believes the pullback will continue throughout this year, it expects SolarEdge to return to profitability in the first half of 2025.
BofA explained that it dropped the price target even as shares look appealing on a valuation basis because “we look for a more tangible path for margin and cash flow recovery before we would take a more bullish view on the stock.” The strategists added that “the sector backdrop remains too uncertain to assume full fundamental recovery in the near term.”
Shares of SolarEdge Technologies hit a nearly seven-year low earlier this month, and even with today’s 9% rise to $27.32 as of 1:55 p.m. ET, they’ve still lost about 70% of their value year-to-date.