By: Vicente Cabrera, AIM Student at Marquette University
Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.
• SolarEdge Technologies, Inc. (NTSE:SEDG) is a leading in the development of smart energy technology. It’s products and services include photovoltaic inverters, power optimizers, photovoltaic monitoring, software tools, and electric vehicle chargers. The company derives its revenues from 117 countries; mainly from the United State (47.6% FY 2019 Revenues), Netherlands (14%), and Germany (4.6%). The company was founded in 2006 and is headquartered in Herzliya, Israel.
• SEDG’s revenues diversity and strong product offerings have helped mitigate the worst of COVID-19 impacts. European market has remained strong with demand not being impacted by COVID. On the other hand, US market has seen a large headwind with declining revenues and has seen a slow recovery, but remain below 2019 levels.
• SEDG has invented an intelligent inverter solution that has innovated the way power is harvested and managed in a solar photovoltaic system. This solution has allowed the company to maximize power generation while also lowering the cost of energy produced by the system.
Key points: In September 23 SEDG announced a $550 million aggregate principle amount of 0% convertible senior note due in 2025. This has brought an influx of cash to expand the company and accelerate growth.
• The market for residential battery deployment has been growing rapidly. SEDG estimates a 53% average y/y growth. In addition, SEDG’s 2GWh battery cell factory is expected to go live in 2022 and is estimated to bring in $500mn annual run-rate revenue.
• SEDG plans on producing a 330Kw commercial inverter in 2020 (compared to 120Kw current product). This will improve cost competitiveness. Currently, SEDG holds 15% of the market share in the US and the inverters business segment makes up 44% of SEDG’s revenues.
What has the stock done lately?
SEDG was pitched on February 2, 2018 at a price of $35.85 with a price target of $47.32. The stock since has gone up 700% to $289. This impressive growth has been due to the innovated products the company offers.
Past Year Performance
SEDG has increased 260% in value over the past year and has increase sales by 52% and net income by 14%. SEDG currently has a P/E of 86.3, which is far from its high of 113 and from its low of 9.
Solar Edge technologies has been a very lucrative investment in the AIM portfolio and has become one of the highest allocated stock in the portfolio. The investment thesis written in February 2018 has already played out, but looking into the company’s financials and investor relations I believe the company will continue to add value to the portfolio. The company has handled COVID very well and has created plans to further expand. I recommend we either trim the holding to lock in some profits or continue with the current position.