Vertical Group analsyt Gordon Johnson had a cautious note on SolarEdge Technologies (NASDAQ: SEDG) Tuesday following an accounting "deep dive". In it, he finds the company's accounting similar to the recent accounting controversy surrounding Enphase Energy's (NASDAQ: ENPH).

First, the analyst highlights that SEDG's current auditors are Ernst & Young Israel accountants Kost Forer Gabbay & Kasierer. He recalls three instances, including the widely known accounting chicanery alleged by Ceaserstone, when the auditor was associated with accounting impropriety.

Next, the analsyt analyzed GTM data, which shows a discrepancy between the numbers SEDG is reporting. Johnson asks "is it channel stuffing, or something a bit more nefarious."

The analsyt shows data highlighting that GTM Research’s Solar Data Hub had been "statistically significant" for SEDG before they noticed that last twelve months prior to the 3Q17 report when SEDG’s numbers began to differ materially from GTM’s reported figures. He highlighted that on average GTM’s data explains 97.0% of SEDG’s reported results from 3Q16-to-2Q17. Meanwhile, the analysts noted unlike the data for SEDG dating back to 2Q17, there is no aberration in GTM data versus that reported by SEDG’s peers in 3Q17/4Q17 and the GTM data seems a highly reliable metric at gauging reported results for SEDG’s peers.

Consequently, with 67MW, 100MW, and 132MW of excess SEDG volumes vs. GTM’s reported data in 2Q17, 3Q17, and 4Q17, respectively, (i.e., what the company reported), Johnson sees three outcomes as possible…

(a) these numbers represent inventory sell-in to distributors and end market customers in excess of sell-through (suggesting risk to SEDG’s 2Q18/2H18 results as inventory is destocked, as we’ve warned since 3Q17),

(b) SEDG is engaging in aggressive accounting practices, potentially similar to ENPH, or

(c) while GTM’s data for all of SEDG’s US peers is accurate in 2Q17, 3Q17, and 4Q17, somehow, for SEDG, GTM has gotten it wrong the past 3 quarters.

It is the firm's view that "c" the most unlikely of the three scenarios and said, "SEDG has some questions that need answering on its 2Q18 conference call slated for 5pm EST this coming Thursday (8/2/18)."

In a follow-up note, Johnson highlighted that the company did not properly sign off on their Sarbanes Oxley requirements in 2016 10-K and 9/30/2016 10-Q, and were thus called out by the SEC. "This was a similar, as you’ll remember, to the action done by SEDG’s CFO at a previous firm," he said. "Also, in our view, the moving of their fiscal year makes it difficult for financial transparency."

The analyst reiterated a Sell rating and $29 price target on SEDG, suggesting 45% downside.