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Bull of the Day: SolarEdge Tech (SEDG)

Many companies say they are cutting costs, and streamlining production to be more efficient, but few actually accomplish their goals in such a short period of time. SolarEdge Technologies ( SEDG ) has been able to cut costs, produce more efficient products, and post record revenues over the last year. More importantly, they are projecting to experience an annual +10% cost reduction in their DC optimizer product via improvements in scale, and supply chain management. And, their Gen3 inverter is expected to be half the size, and half the weight which will directly translate into a lower cost structure. Due to these reasons, SolarEdge Technologies is the Zacks Bull of the Day.

This Zacks Rank #1 (Strong Buy) company provides inverter solutions. The company's SolarEdge system offers power optimizers, inverters and a cloud-based monitoring platform. It serves residential solar installations to commercial and small utility-scale solar installations. Specifically, "SolarEdge invented an intelligent inverter solution that revolutionized the way power is harvested and managed in a solar photovoltaic (PV) system. The SolarEdge direct current (''DC'') optimized inverter system maximizes power generation at the individual PV module level while lowering the cost of energy produced by the solar PV system" according to management.

In their most recent quarter, the company posted record fiscal Q4 15, and record fiscal year 15 revenues; +13.9% q/q, and +120.8% y/y. Further, management was able to improve gross margins to 28.7% in Q4 15, and 25.2% for FY 15. During this time, the company had 284 Megawatts (AC) of inverters shipped for Q4 15, and had a total of 920 Megawatts (AC) for FY 15. According to Founder and CEO Guy Sella, "We successfully grew our business with our existing and new customers and generated record revenue for the fourth fiscal quarter and the entire fiscal year. Our increased manufacturing capacity coupled with continued cost reduction, brought gross margins to a quarterly and annual record. These revenue and cost reduction initiatives generated strong bottom line results; consecutive profits in each quarter of fiscal 2015 and strong cash flow from operations."

Increasing Estimates

As you can see in the table below, expectations for 2016 are almost double of the current stock price.

Over the past 30 days estimates for Q1 16, Q2 16, FY 16, and FY 17 have all seen significant improvement: Q1 16 jumped from $0.15 to $0.28, Q2 16 rose from $0.19 to $0.32, FY 16 improved from $1.02 to $1.31, and FY 17 climbed up from $1.65 to $2.02. This translates into year over year growth of 161% in 2016 and 166% in 2017. Impressive numbers to say the least.

Bottom Line

Going into 2016, management expects revenues to continue to increase with estimated quarter over quarter improvement in a range of 9.6% to 13.8%. Also, margins are expected in a range of 27% to 29% (in-line with most recent record breaking quarter). Further, SolarEdge is a balance of system partner with Tesla ( TSLA ) who is launching their stationary energy storage products in Q4 15. This storage device is expected to boost revenues for SolarEdge. These positive points and management's cost cutting and product development is expected to boost sales all the way into 2017.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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