Solar stocks definitely haven’t been huge winners during this time of high interest rates. Soft demand for solar-power equipment, especially in Europe, has taken a toll on SolarEdge Technologies (NASDAQ:SEDG). All in all, it’s just too risky to wager your hard-earned capital on SolarEdge stock.
Sometimes, it can make sense to buy an “underdog stock.” SEDG isn’t just an underappreciated underdog, though. It’s a struggling business with subpar financials and other problems, which I’ll discuss in a moment. So, be prepared for SolarEdge stock to continue losing value in the coming months.
SolarEdge’s Horrendous Quarterly Results
SolarEdge Technologies shares are, as the old saying goes, “cheap for a reason.” You’ll understand what I’m saying when you glance at SolarEdge’s horrendous first-quarter 2024 financial results.
I can only describe this as a bloodbath. In Q1 of 2024, SolarEdge’s revenue plunged 78% year over year to $204.4 million. We can blame high interest rates or weak solar-power demand or whatever, but the numbers don’t lie.
Turning to the bottom-line results, SolarEdge reported a GAAP-measured net earnings loss of $157.3 million in 2024’s first quarter. In contrast, SolarEdge recorded GAAP net income of $138.4 million in the year-earlier quarter.
Looking at it from a different angle, SolarEdge incurred a quarterly non-GAAP net loss of $1.90 per share, missing the analysts’ consensus estimate of a loss of $1.58 per share. So, no matter how you slice it, SolarEdge had an awful quarter.
A Double-Shot of Bad News for SolarEdge
In case you’re not already convinced to avoid SolarEdge stock, here’s a double-shot of unfavorable news. First, SolarEdge Technologies announced and then priced a public offering of $300 million worth of convertible senior notes.
This means SolarEdge is taking on a large amount of debt, which the company will have to pay back with interest. These will be convertible senior notes, so they can be converted to stock shares. This raises concerns about the potential share-value dilution of current SolarEdge investors’ holdings.
Additionally, PM&M Electric, a major client of SolarEdge, reportedly filed for bankruptcy. Barron’s describes PM&M Electric as an “Arizona-based residential solar installer that owes the company $11.4 million.” At this point, there’s no way to know how much (or I should say, how little) of that $11.4 million SolarEdge will actually get.
SolarEdge Stock Might Give Investors a Heat Stroke
Even if you’re looking for sizzling deals this summer, it’s still a bad idea to invest in SolarEdge Technologies. Sure, SolarEdge shares might look cheap, but there are serious problems associated with this company.
Hopefully, things will get better for SolarEdge Technologies in the coming months, but I wouldn’t count on it. In the final analysis, investors can look for more favorable risk-to-reward scenarios and should completely avoid SolarEdge stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.