The Sun Shines Bright on SolarEdge Technologies

There are few better times than right now to talk about SolarEdge Technologies (NASDAQ:SEDG). For those who doubt such a bold pronouncement, just take a look at the middle of the United States right now. If you can see it, that is, because a lot of places in that whole area are dark on at least an intermittent basis right now. With rolling blackouts and other less-planned power outages taking place, the notion of a backup system isn't going unconsidered, and that's driving SolarEdge to some big new highs based on its latest earnings report.

Shining Light in the Earnings Reports

SolarEdge turned in wins on several fronts, starting with quarterly earnings. The company turned in earnings per share figures of $0.98, which beat estimates of $0.87 nicely. Revenues also came in over what was expected at $358.1 million, with $327.1 million of that coming directly from solar products sales. While revenues were up from the preceding quarter—up 6%, in fact, when the company posted $338.1 million—they were also down from the same time the preceding year, when the company posted $418.2 million in revenue.

The revenue story for specifically solar business was about the same as the earnings story: up against the previous quarter when $312.5 million was posted, but down 16% against the same time last year with $389 million.

Better yet, the company also posted some of the numbers from its full-year report as well, noting that the company turned in a new record high for revenue, $1.46 billion. Accompanying this was a record high for solar products revenue, of $1.36 billion.

A Cloudy Forecast from Analysts

Despite these impressive numbers, it's clear that there's a certain skepticism around SolarEdge. The company has had a “hold” rating for the last six months, according to our latest research, though sentiment is on the bullish side of “hold” for now.

Six months ago, the company had one “sell” rating, eight “hold” and five “buy” ratings to its credit. Three months ago, that shifted to two “sell” ratings, eight “hold” and six “buy”. A month ago, it changed once more, adding a new “hold” to the mix. Today, one more “buy” has been added, bringing the running total to two “sell”, nine “hold” and seven “buy” ratings.

Meanwhile, the company's price target has exploded. Six months ago it was at $147.93, which turned into $209.20 three months ago. A month ago, it jumped to $249.29 before finally settling at today's price target of $267.94. This currently represents downside risk for the company, but the price target has actually represented downside in three out of the last four cases, with only the price target from three months ago representing any kind of upside.

Slowed Growth or Shifting Priorities?

Some are expressing the belief that SolarEdge's growth is slowing, and such a projection isn't out of line given what we've seen with the numbers so far. It's clear the company is still growing, but when it's not turning in numbers like those seen last year, there's clearly an issue.

There are still opportunities for growth, of course; SolarEdge itself looks for positive gains on the strength of the US' residential market. We've seen enough explosive gains from homebuilders to know this is a possibility, and with the right marketing to back it up, SolarEdge might be able to make a case in at least some markets. Granted, solar power isn't for everybody—just ask any place that's frequently overcast—but where it's usable, it can be useful. SolarEdge might be able to piggyback on the gains seen from homebuilders like Toll Brothers (NYSE:TOL) among others and convince new homeowners to add backup power systems to ensure their house runs as designed regardless of conditions.

SolarEdge is also branching out into other markets, like electric vehicles, which should help going forward. The company's e-Mobility division recently announced it was set to supply both batteries and electric powertrain systems to Fiat (NYSE:FCAU), helping to drive development in the E-Ducato line of light commercial transport.

Yes, all growth is finite, to a certain degree. As companies grow, they need to find new markets and potential revenue sources, and SolarEdge is looking like it's reaching the point where it needs new markets in order to even approximate its earlier growth. It has the potential to do that, of course; hitting up homeowners directly will likely help, especially if a likely sympathetic Biden administration provides tax incentives for those adding solar to their homes. With the right marketing, SolarEdge could tap a previously-untapped market, and there are certainly enough people for whom memories of power outages will be sufficiently fresh to make that marketing sink in.