No. of Recommendations: 9
Why are you being so cagey? If you named the stock maybe someone would give you a worthwhile insight, and I can practically guarantee that no one will attempt to front run you.
Dunno, mostly concerned that it will devolve into tangents and into politics. But you're right, there could be worthwhile insights, so ...
SolarEdge, SEDG. Solar stocks are a bit bubbly, like bitcoin. They go up a lot and down a lot based on news, like tariffs, incentives, who's POTUS, etc.
In general they are good to avoid, like most things that become commoditized.
However I am in that business, and have used their products for 10 years. I am in touch with them regularly, including even today.
Their technical and sales folks visit my growing company pretty regularly, every couple of months. I understand their technology and strengths and weaknesses.
Not that I have any inside information, I don't. But I know what's going on in their company and the industry, their competitors, and the regulatory landscape.
They recently have been one of the largest residential inverter companies in the world.
They have taken a larger hit than almost any of the solar companies for a couple reasons, which in my mind make up the bear case.
They have suffered more than most from high interest rates, which have significantly slowed residential solar and to a lesser extent commercial.
They also made some bad pandemic related decisions, for instance when electronic component shortages caused very high demand a few year ago.
When they finally got the supply chain working, they built too much product, right when interest rates took off and the market slowed down.
This resulted in a huge inventory problem, particularly in Europe.
Even now that inventory problem is not near resolved. They have had two rounds of layoffs, one announced a day or two ago.
Their revenue is down something like 80% in the last few years. Their quality is not where it should be.
There have been changes in the National Electric Code which may somewhat dampen demand for their DC optimizers, the basis of their technology.
Another bear feature is that they are an Israeli company, so there is a certain amount of politics surrounding them.
And concerns about their situation should the war over there escalate.
The bull case is based on a couple things, which seem likely to come to pass.
Interest rates will probably come down at some point. Wars tend to get resolved sooner or later.
Solar is somewhat cyclical; however the climate issue is not going to go away as it's just simple physics.
That's another way of saying the renewable industry seems to be one that will, one way or the other, see continued growth and present opportunities.
So it is a matter of whether SolarEdge's management can get the company through the downturn and come out with new and better products at lower prices (IMO).
They have moved into storage, both residential and commercial, and are moving production to the USA due to incentives from the inflation reduction act.
They have upcoming bidirectional chargers for V2H applications, and a wide customer base. They have some data analytics products as well.
Tesla has recently announced their first DC coupled inverter/battery combo, and Tesla is going after SolarEdge and Enphase with aggressive pricing.
SolarEdge will need to respond to that threat. I am watching closely what happens here.
It is crystal clear that it is a gamble to buy their stock or calls. Frankly, at the moment, I think it's more likely than not that they will flounder and/or fail.
There is a chance, though, that the macro conditions will become favorable and they survive this bad period to grow their revenue back toward where it was before.
And that is where a small bet with the right call options could potentially pay off.
Mark
