Struggling next generation energy company SolarEdge Technologies (NASDAQ: SEDG) gave investors a reason to be sunny and cheerful on Thursday with the latest news. The company announced it would close one of its less important businesses, and the market responded by sending the stock price nearly 9% higher. This was in stark contrast to the slump S&P500 index, which ended the day 0.4% lower.
Before the market opened, SolarEdge announced it was ceasing all operations in its energy storage division. This will affect approximately 500 employees, the majority of whom are in South Korea. The solar company expects the move to save about $7.5 million in costs each quarter. Assets related to the business are intended to be sold; this includes the production facilities it owns.
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In the press release announcing the measure, SolarEdge quoted interim CEO Ronen Faier as saying that it represents the “continued execution of two of our key priorities: financial stability through cost reduction, return to positive cash flow and profitability; and focus on our core activities.” business lines of solar, PV-linked storage and energy management capabilities.”
In what is certainly no coincidence, the announcement comes not long after SolarEdge reported its third-quarter results. It was not a fruitful period for the company, to say the least. Revenue was dangerously close to the lower end of management’s expectations, and was also down 64% year over year. Meanwhile, GAAP net income fell sharply to a loss of more than $1.2 billion, compared to the $62 million loss in the same quarter last year.
SolarEdge’s current focus, sensibly enough, is to focus on its core business: delivering a range of solar energy offerings. Yet competition in this sector is fierce and has not yet scaled sufficiently to make room for numerous profitable companies. Investors should be very careful not only with this stock, but also with the solar sector in general.
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