FBR Capital Downgrades SolarEdge Technologies (SEDG) to Market Perform; Sluggish U.S. Solar Market
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FBR Capital downgraded SolarEdge Technologies (NASDAQ: SEDG) from Outperform to Market Perform with a price target of $17.00 (from $32.00), saying it cannot overcome a sluggish U.S. market.
Analyst Carter Driscoll commented, "Yesterday, SEDG delivered F1Q17 results that again show the company is prioritizing cash generation over growth. While revenues of $128.5M missed the low end of guidance ($130M– $139M), gross margin of 32.6% exceeded the guided range (30%–32%), suggesting that SEDG continues to value sustained profitability above chasing less profitable market share. We agree with this strategy. However, we expect the U.S. market to remain sluggish longer than previously thought, with 2017 YOY installation growth closer to 15%–20%, down from 20%–30%. Balance sheet strength allows SEDG to spend aggressively on new product development, sales & marketing personnel to target tier 2 and 3 installers, and more geographic expansion (India, Australia, and Japan). We agree that investment is the right strategy longer term; R&D spending should allow SEDG to stay ahead of competitors technologically, though it comes at a cost of flattening EPS growth. As a result, we have lowered our estimates, price target (to $17 from $32), and rating (to Market Perform from Outperform)."
Shares of SolarEdge Technologies closed at $14.00 yesterday.
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