SolarEdge Heats Up on Goldman Sachs Upgrade to Buy

SolarEdge Technologies is upgraded by a Goldman Sachs who believes the solar energy sector's fundamentals 'remain rather steady.'

SolarEdge Technologies  (SEDG) - Get SolarEdge Technologies, Inc. Report was beaming Thursday after a Goldman Sachs analyst upgraded the solar panel maker to buy from neutral.

Shares of the Israel-based company were climbing 6.1% to $247.70 on Thursday.

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Goldman Sachs analyst Brian Lee cut his price target on the company to $290, down from $312, as part of a broader research note on solar energy

The sector is down about 40%to 50% over the past three months, and a decline of this magnitude has only been seen two to three times in the past decade, Lee said in a research note. 

The analyst added that the large pullbacks had previously been associated with deterioration in fundamentals.

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"This time around, fundamentals remain rather solid, in our view," Lee said, "as evidenced by the majority of our coverage reporting inline to beats on recent 1Q results and consensus revenue estimates having moved 5%-15% higher YTD across most of the group."

The analyst said that stock underperformance has largely been driven by a downtick in multiples, which are down 20%-60% since the start of the year with "stocks now reflecting pre-Biden nomination levels that suggest, to us, limited policy catalysts are being baked into the group."

The analyst also upgraded Shoals Technologies, which launched a roadshow in January, to buy from neutral.

Real Money's Ed Ponsi noted that not only is SolarEdge well below its 52-week high of $377, it has significant support nearby.

"I believe this stock is unlikely to fall below $180, a major support level from last fall," he wrote. "SolarEdge also received a buy signal from its MACD (moving average convergence divergence) indicator on Wednesday."

Earlier this month, SolarEdge Technologies posted weaker-than-expected profit for the first quarter. 

Adjusted profit totaled 98 cents a share, up from 95 cents but lagging analysts’ estimate of $1.01. Revenue beat expectations, totaling $405.49 million in the latest quarter, down 6% from a year ago.