BMO Capital Markets has adjusted its outlook on SolarEdge Technologies (NASDAQ: NASDAQ:SEDG), a company specializing in solar inverters and energy storage as the firm lowered the price target to $24 from the previous $26 while retaining a Market Perform rating on the stock.
The price target adjustment follows SolarEdge's second-quarter financial performance, which had been anticipated to reflect a free cash flow (FCF) burn of approximately $150 million.
The expectation was set during the announcement of the company's convertible notes offering on June 24, 2024. SolarEdge had also reaffirmed its second-quarter guidance at that time.
The company's recent update, however, highlighted weaker-than-expected guidance for the third quarter. Additionally, the pace of recovery for revenues and margins has been moderate. BMO Capital Markets noted that SolarEdge is likely to continue experiencing FCF burn through at least the first quarter of 2025.
The possibility of asset write-downs in the next quarter was also mentioned, as the company approaches the maturity of its $347.5 million convertible notes due on September 15, 2024.
SolarEdge's third-quarter revenue fell short of market expectations by 23%, and it anticipates a cash burn of $70-$90 million in the same period. SolarEdge also plans to cut 400 jobs in a bid to restore profitability.
Concerning financial maneuvers, SolarEdge secured $37 million in convertible senior notes due in 2029, led by Goldman Sachs (NYSE:GS) & Co. LLC. This is in addition to the $300 million in convertible notes due in September 2025 already on the company's balance sheet.
InvestingPro Insights
As SolarEdge Technologies (NASDAQ:SEDG) confronts challenges highlighted by BMO Capital Markets, real-time data from InvestingPro provides additional context for investors. The company's market capitalization stands at approximately $1.25 billion, reflecting the size and scale of the business in the current market. However, SolarEdge's P/E ratio, as of the last twelve months leading into Q1 2024, is negative at -7.53, signaling that the company is not currently generating profits relative to its share price. This is further evidenced by a significant revenue decline of 34.19% over the same period, which may concern investors looking for growth stability.
InvestingPro Tips reveal that SolarEdge is trading at a low revenue valuation multiple and is expected to see a decline in net income this year. These insights are critical for investors considering the company's future profitability and cash flow situation, especially in light of the upcoming maturity of its convertible notes. For those seeking more detailed analysis, InvestingPro offers additional tips on SolarEdge, including insights into management's actions, such as aggressive share buybacks, and the company's liquidity position.
For a deeper dive into SolarEdge's financial health and future prospects, investors can explore a total of 19 InvestingPro Tips available at https://www.investing.com/pro/SEDG, which may offer valuable guidance in these volatile times.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.