SolarEdge becomes short players’ favorite

The stock price of solar technology company SolarEdge (Nasdaq: SEDG), which was at around $120 a year ago and at its peak three years ago was close to $370, is currently just $19.5, giving the company a market value of $1.1 billion. (95% down from peak). This comes after a slight rebound from the low that SolarEdge sank to last month at less than $18, a symbolic level, as that was the price at which the company filed for its initial public offering in 2015.

SolarEdge provides solutions to the solar industry designed to increase production and reduce costs. At its peak, the company was valued at around $20 billion, and became the first Israeli company in the S&P 500 index.

As if all this value destruction wasn’t enough, the company’s stock has become the stock of choice for short players. According to investment website Seeking Alpha, it ranks second for short positions in its shares among companies traded on the New York Stock Exchanges. The position amounts to 32.9% of its capital.

Short selling is a way to make gains on a stock whose price is expected to fall. The trader borrows the stock, sells it in the market, and then buys it back to return it to the owner. If the trader has guessed correctly, he profits from the difference between the price at which he sells the stock and the lower price at which he then buys it.

According to Nasdaq figures, at the end of September, the short position in SolarEdge amounted to 16.5 million shares, and the average daily trading volume in the stock was 3.8 million shares, which gives days to cover, that is, the number of days needed to cover. Close the short position at 4.3.

Inventory problems and poor guidance

SolarEdge has seen many disruptions in the past year. It started with an inventory problem of its products that was revealed to investors last summer and that affected the company’s financial situation: in the period of peak demand, distributors working with SolarEdge bought large quantities of them, and when the situation changed and the price changed, sales fell, and they bought less from the company. SolarEdge estimates that this issue should be resolved in the first half of 2025.

Then came a profit warning and weak guidance for the future. The company was also downgraded from the Standard & Poor’s 500 after two years, due to a decline in its stock price, and it undertook two rounds of layoffs, letting go of 1,300 employees, about 750 of them in Israel. A few months ago, the company’s veteran CFO Ronen Fire announced he was leaving the company, but two months later the company’s CEO Zvi Landow made a surprise announcement that he would step down after five years in the role, and Fire was named interim CEO.

According to numbers from the Wall Street Journal, 34 analysts currently cover SolarEdge. 24 of them received neutral ratings, six positive, and four negative. The average price target for the stock is $26.56, which is 36.5% above the current market price.

Published by Globes, Israel Business News – en.globes.co.il – on October 14, 2024.

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