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Karishma Vanjani
SolarEdge Technologies stock sank Wednesday after Citigroup analysts recommended selling shares of the solar energy company, citing deteriorating fundamentals in the European market.
The move comes after SolarEdge announced its fourth round of layoffs in a year, slashing 400 jobs on Monday. Two directors joined its board the same day.
In a note on Wednesday, Citi's Vikram Bagri and team downgraded SolarEdge's stock to Sell from Neutral, and cut the target price to $9 from $12. The new target implies the stock nearly halves from its last close.
Europe solar demand has been declining sequentially and the company hasn't increased its market share despite long-running promotions, Citi noted.
The stock was down 12% to $15.52 in early afternoon.
SolarEdge stock dropped 86% last year, partly because higher interest rates and inflation cut into demand, keeping inventories high. It launched promotions worldwide, but particularly actively in Europe, to compete more effectively and clear inventory.
Still, market share in Europe has been stable at best, Bagri wrote, citing data from the market intelligence firm Sensor Tower. In 2025, SolarEdge assumes there'll be mid-to high single-digit overall price reductions year-over-year without accounting for promotions, while Europe sees double-digit reductions, according to the company's call discussing earnings in November.
Citi's call comes less than a month after Goldman Sachs gave the shares a rare double upgrade to Buy, saying the market is overstating the risks.
SolarEdge is one of the most shorted stocks in the U.S., with 33% of its shares outstanding shorted, according to S&P Global Market Intelligence. That means the market largely expects shares to decline, but it also indicates that even a small positive update could lead to a sharp rebound.
Corrections & Amplifications: SolarEdge is one of the most shorted stocks in the U.S., with 33% of its shares outstanding shorted, according to S&P Global Market Intelligence. An earlier version of this article incorrectly said SolarEdge is one of the most shorted stocks in the S&P 500.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
SolarEdge Technologies' tight liquidity position, challenging earnings outlook and competition raises concerns at Citi. The company faces stubbornly high operating expenses despite the restructuring announcements, especially relative to demand, Citi analysts say in a research note. Furthermore, recent price reduction haven't driven market share gains, the analysts add. Citi cuts SolarEdge Technologies to sell from neutral, noting that it remains cautious on residential solar largely due to dependence of companies on incentives and relatively weaker financial flexibility. Shares drop 12% to $15.46. (sabela.ojea@wsj.com; @sabelaojeaguix)
(15:29 GMT) SolarEdge Technologies Price Target Cut to $15.00/Share From $19.00 by Wells Fargo
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