SolarEdge Technologies — NASDAQ:SEDG

About SolarEdge Technologies

SolarEdge Technologies, Inc. engages in the operation of inverter solution for the harvesting and managing of photovoltaic solar power. Its products include power optimizer, inverter and monitoring portal.

The company was founded by Guy Sella, Lior Handelsman, Yoav Galin, Meir Adest and Amir Fishelov in 2006 and is headquartered in Hod HaSharon, Israel.

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SolarEdge provides an intelligent inverter solution that is a global market leader.

Key points:

  • $6.30 in cash (30% of market cap)
  • Growing in a market down turn
  • We continue to gain market share both in the U.S. and in Europe
  • New product will increase margins.
  • Growing globally.
  • Market leading technology.

Key management comments:

We are well positioned to continue to increase revenues in existing markets and new markets as we see fit

We’re expecting to start a new generation of batteries with Tesla and with LG to be installed sometime from mid-May

We’re working hard to find interesting candidates (M&A). So far we eventually do not have nothing to report. (To spend the cash on, which will bump earnings)

Growth Drivers

  • Upturn in US solar market
  • Continued marketshare growth from competitors (US and Europe)
  • New product will increase margins
  • Global expansion of solar industry as battery and solar solutions become more viable


  • Unclear how long US solar market will be in a down turn, however Trump does seem to be supportive of solar
  • Hard to forecast how long 35% EPS growth will be sustainable
  • Potential for a lower priced competitor to come out of China (but likely to be an inferior product)

Valuation Metrics

Last year EPS growth was 35%, expect similar growth given; expanded global presence, taking market share from US competitors, increased margin from new product line with further upside if US solar market picks up.

That produces forward FY EPS of $2.10.

Take out the $6.30 / share in cash provides current EV of $14.45, putting the company on a foreward EV EPS of 6.8

Working on a PE ratio of 30 (given 35% annual growth) and using the current share price (ignoring all the cash) gives a valuation $63.

Further significant upside exists if the company finds an earnings accreditive acquisition for the $250m of cash they have sitting around.

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Stock notes

03 Aug 2017

SolarEdge has a sunny quarter, with an even brighter outlook

SolarEdge has produced a fantastic quarter validating our underlying belief the company is growing strongly and undervalued.

Earnings per share is up 25% YoY, revenue up 9% YoY and gross margin a very significant increase of 10% YoY. This produced a company record of quarterly revenue, earnings and gross margin.

Company management re-iterated its longterm objective of increasing gross margin from the current high of 34.6% to 37% over the next 12 months. New products are also expanding the company’s product range more into commercial solar projects, electric vehicles and, further in the long term, utility scale projects.

Revenue growth is being fuelled by strong international growth combined with market share gains from competitors. While R&D has been driving margin growth, by improving production and product efficiencies.

Our forward 12m earnings forecast is $2.00 / share, putting the company on a PE of 11.4 at todays close of $22.85.

In short; SEDG has earnings growth of 25%, a market leading product and $270m cash. Should be on a PE of 20-25 minimum with a price closer to $40. Re-iterate strong buy.

Q2 key financials:

  • EPS $0.55 (+25%)
  • Revenue $136 (+9%)
  • Gross margin 34.6% (+10%)
  • $274m in cash (25% of market cap)

Q3 forecast:

  • Revenue $155m - $165m
  • Gross margin 33% - 35%
  • (Implies EPS $0.65 - $0.70)

Key points from management:

  • Lower production costs / unit
  • Revenue growth primarily driven by Europe.
  • Commercial growth more than residential (which is growing well)
  • New larger capacity inverters opens up large commercial project opportunities
  • Rapid EV charger
  • HD-Wave available worldwide
  • Strong $ benefit from Euro vs USD currency
  • Targeting long term gross margins of 36-37%
  • Inventory levels in channels are estimated to be lower now than in Q1