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S&P 500   3,841.94
DOW   31,496.30
QQQ   308.68
S&P 500   3,841.94
DOW   31,496.30
QQQ   308.68
S&P 500   3,841.94
DOW   31,496.30
QQQ   308.68
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Are Big Things Ahead for SolarEdge Technologies (NASDAQ:SEDG)?

Thursday, January 21, 2021 | Steve Anderson
Are Big Things Ahead for SolarEdge Technologies (NASDAQ:SEDG)?

While it's a pretty safe bet that solar technology won't do everything people wish it would for some time to come, it will almost certainly make a good side technology to help reduce dependence on large-scale power grids and power generation systems like coal and natural gas. SolarEdge (NASDAQ:SEDG) recently got some new favor all its own as the company landed new coverage from Morgan Stanley, and very positive coverage at that.

What a Way to Start Out

Morgan Stanley got the ball rolling in grand style for Morgan Stanley, issuing an “overweight” rating on the solar hardware manufacturer. Reports suggest that the analyst is looking to SolarEdge to not only provide quality results, but also take advantage of a market that's rapidly expanding.

The market is expected to expand rapidly with the arrival of President Biden, whose latest round of executive orders are set to provide some assistance to the clean energy field as a whole. Within hours of his inauguration, Biden had started moves to get the US back in on the Paris climate accords, a move which would put more weight on solar power generation systems.

Not only did Morgan Stanley put the added rating power on SolarEdge, but it also improved its estimates of the company's share price. The new price target is $354 per share, which represents around 19% upside potential from the share price at Wednesday's close.

A Less Emphatic Consensus

Morgan Stanley's move here isn't too far a cry from the consensus, our latest research makes clear, but it is certainly taking a step out on its own. Our latest research declares SolarEdge a “hold” and has done so for the last six months. Some improvement has been seen, but lately, the bottom has dropped out and recovery has only recently begun.

Six months ago, the consensus view was one “sell”, seven “hold” and six “buy” ratings. The seller departed the field three months ago, leaving us with nine “hold” and seven “buy”. Sellers came back in force a month ago, however, as there were two “sell”, eight “hold” and six “buy.” Today, that's shifted once more to two “sell”, nine “hold” and seven “buy”.

The price target, however, has only increased, going from $132.71 six months ago to $262 even today. That's also the first time the company's price target has represented downside potential, as the share price today is $304.46 as of this writing. Price target adjustments, however, have recently taken place; about two weeks  ago, Truist started coverage on the company as a “buy” with a price target of $435. Meanwhile, Piper Sandler hiked its share price target to $340, Credit Suisse went up to $284, and JPMorgan Chase boosted its price target to $387, suggesting there is still some room to run for SolarEdge.

A Step Closer to Reality

The notion that a Biden government would support solar power generation isn't out of line; it's well in keeping with the norms as far as energy policy goes therein. There's a certain value in solar power generation as well, especially when it's viewed as a supplementary or backup power system. Just look at the Californians who are getting into solar as a means to create their own power when grid power is shut down in high wind conditions. They're also turning to mechanisms like the Generac (NYSE:GRNC) line of whole-house generators, but certainly, the combination of solar power and batteries as a backup system for consumer power generation is catching on. Consider also that California is Tesla's (NASDAQ:TSLA) largest market, and that in a pinch, a Tesla car can be used as a generator for home power and the idea of regular consumers generating their own power isn't out of line.

Ask anyone who's been in a blackout that's lasted multiple days what they think of backup power generation systems and you'll likely get a lot of positive responses. While solar technology will likely never do what everyone hopes it will, the aggregate effect of lots of houses generating their own power from the sun will necessarily drop the amount of power that needs to be produced on a centralized basis by big and surprisingly fragile power grids.

Subsidizing the costs of a backup power generation system could be a smart play, and that means companies like SolarEdge stand to benefit in a big way, especially after a recent dip in share price that provides a nice entry point. While SolarEdge certainly has competitors—First Solar (NASDAQ:FSLR) one of the biggest among them—the more moves it can make to secure its position in a market with possibly heavy demand coming up, the better off it will be in the long term.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Tesla (TSLA)1.4$597.95flatN/A1,200.70Hold$324.92
First Solar (FSLR)1.5$73.70flatN/A35.26Hold$92.63
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