Goldman Sachs Analyst Brian Lee has revised ratings for key residential solar stocks. The analyst notes that there is a disconnect between mid- to long-term fundamentals and valuations for solar/storage stocks heading into 2025.
It appears that solar stocks pose risks related to policy uncertainty, even as drivers of economic growth, such as US energy demand and pricing, remain strong.
SEDG: The analyst has upgraded SolarEdge Technologies, Inc. (NASDAQ:SEDG) rated the company a Buy from Sell and raised its price target to $19 (from $10 previously).
After a challenging period, including a tough US residential solar market and weaker European demand, analysts note that estimates have bottomed out and concerns over SEDG’s $350 million debt by 2025 are overstated are.
SEDG’s recent cost-cutting measures, including workforce reductions and facility downsizing, strengthen the outlook, the analyst said.
Lee says that while the call may come early, he sees a turnaround as the company benefits from improved cost control and a better product mix.
The analyst sees FY25 as a key turning point, with growth likely to accelerate in FY26.
The analyst estimates negative earnings per share for FY25, but expects a positive fourth quarter of FY25 and strong growth in FY26. The FY26 EPS estimate of $1.64 is well above the $0.55 consensus, the analyst said.
CSIQ: Meanwhile, Lee has lowered the rating Canadian Solar Inc. (NASDAQ:CSIQ) to Sell from Neutral and lower the price target to $11 (from $14 previously).
The analyst’s negative outlook stems from policy risks under the Trump administration and tariffs on solar energy imports from Southeast Asia.
As a major foreign supplier of solar panels to the US, CSIQ is highly exposed to these risks, which will impact margins, especially as the US has been one of the most profitable markets of late, the analyst says.
The analyst also sees consensus estimates as overly optimistic, with 2025-2026 EBITDA projections 35% – 40% below the Street’s, as recent policy changes and the uncertain outlook are not fully reflected in market expectations.
The analyst says 2024-2025 EBITDA estimates remain largely unchanged, while the 2026 estimate is revised down 6% to $688 million on a bleak outlook.
Price promotion: SEDG shares are up 23.3% at $15.19, while CSIQ shares are up 0.86% at $11.76 at last check on Tuesday.
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|
Date |
Sturdy |
Action |
By |
Nasty |
|---|---|---|---|---|
|
December 2021 |
Citi Group |
Maintains |
Buy |
|
|
November 2021 |
Wells Fargo |
Start coverage |
Equal weight |
|
|
August 2021 |
GLJ research |
Downgrades |
Buy |
To sell |
View more analyst ratings for CSIQ
