2023 was a terrible year for Israeli solar energy company SolarEdge Technologies (Nasdaq: SEDG). The share price slumped nearly 70% and it was relegated from the S&P 500 Index. Despite this, or perhaps because of it US investment giant BlackRock has significantly increased its stake in the company, with an investment of hundreds of millions of dollars.
BlackRock has reported to the US Securities & Exchange Commission (SEC) that it held a 15.8% stake in SolarEdge at the end of 2023, up from 9% in its previous report in April 2023 – an increase of more than 70% in just eight months. BlackRock is the biggest shareholder in SolarEdge with its stake currently worth $707 million. SolarEdge, which develops and markets solar inverters for photovoltaic arrays and other energy generation and storage products and solutions, is managed by CEO Zvi Lando. BlackRock has been a party at interest in SolarEdge since 2017.
SolarEdge’s current market cap on Nasdaq is $4.36 billion, after the share price fell 67% in 2023 and is down almost 80% from its peak in 2021, when it market cap nearly reached $20 billion, making it the most valuable Israeli company on Wall Street. The share price reached its lowest point in November but has since gained 11%.
Why is BlackRock investing in a share that has been plunging?
The plummet in SolarEdge’s share price is due to the weakness in the solar energy market in which the company is operating. The company issued a profit warning before its third quarter results in 2023 and gave weak guidance for the fourth quarter.
The cooling of the market came after a very strong period in the industry, which led to stockpiling of inventory at the distributors that Solaredge supplies, and a consequent drop in revenue as new orders fell. This trend is expected to continue in the following quarters as well. The forecast provided by SolarEdge for the fourth quarter of 2023 is for revenue 60% lower than the corresponding quarter of 2022 – $300-350 million.
So why is Blackrock increasing its holdings in a company that fell by 70% last year and has given negative forecasts? Because in the more distant future, SolarEdge is expected to recover.
The correction in inventories is only a passing problem, and the lowering of the interest rate in Israel last week, together with expectations of imminent interest rate cuts in the US as well, should lower its financing costs and return it to growth and profitability.
RELATED ARTICLES
SolarEdge to be relegated from S&P 500
SolarEdge slumps further on bleak revenue guidance
SolarEdge acquires UK co Hark Systems
SolarEdge also has over $1 billion in cash, which provides it with security. At the same time, the company holds a long-term (unlinked) debt of about $627 million to holders of convertible bonds, which it issued at the end of 2020 at 0% interest.
Lando told “Globes” several months ago that all enterprises involved in the solar energy sector expect market growth in 2024 and that SolarEdge’s current situation is temporary.
Most analysts are sitting on the fence
According to “The Wall Street Journal” most analysts covering SolarEdge are neutral on the company and prefer to wait and see if the situation really does improve. Eight analysts have a “Buy” recommendation, 23 recommend “Hold” and three recommend “Sell” or “Underperform.”
Published by Globes, Israel business news – en.globes.co.il – on January 9, 2024.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.