SolarEdge Stock Drops Following Competitor Enphase's Weak Forecast

SolarEdge's stock fell approximately 8% in early Wall Street trading, reaching about $29.20, following a report from its major U.S. competitor in the home inverter market, Enphase Energy. Enphase's stock plummeted by about 22% to $23.80 after the company issued a weak fourth-quarter forecast and acknowledged that demand for residential solar in the U.S. has not yet recovered.

Enphase reported third-quarter revenues of approximately $293.3 million, a decrease of about 28.5% from $410.4 million in the same period last year, and at the low end of its own projections. GAAP net income was about $23.4 million, or 17 cents per share, with adjusted earnings at 41 cents per share, after a write-down of investments reduced adjusted earnings by about 14 cents. Sales to retailers and installers increased by only about 1% compared to the previous quarter, below the company's expected 10% growth. U.S. sales were down about 35% year-over-year, and European sales dropped about 12%, with notable weakness in France.

The fourth-quarter outlook concerned investors more than the results. Enphase anticipates revenues between $225 million and $255 million, an average decrease of about 18% from the third quarter. The company estimates end-user sales will fall by about 10% and plans to ship fewer units to distributors to reduce their accumulated inventory. Gross profit margins are also expected to shrink to a range of 40% to 43% on an adjusted basis, down from 45% in the third quarter. Enphase holds about $931.8 million in cash and marketable securities, indicating the current issue is demand and profitability, not liquidity.

Enphase is seen as a leading indicator for SolarEdge, as both companies primarily serve homeowners installing rooftop solar systems. This decline follows a broader sell-off in the sector. SolarEdge itself announced another round of layoffs this week, cutting about 200 employees globally, roughly 10% of its workforce, with dozens affected in Israel. This is the fifth round of layoffs in less than three years, following the dismissal of about 900 employees in January 2024, including approximately 550 in Israel. The company currently employs about 2,000 people in Israel, where it is managed and operates a factory in Nof HaGalil.

Despite the challenges, SolarEdge reported a relatively strong second quarter with revenues up about 20% to $346 million, a reduced net loss of about $16 million, and a return to adjusted operating profit of about $10 million for the first time since mid-2023. Growth was driven by Europe and U.S. commercial customers, as the U.S. residential market remained weak. SolarEdge's stock has seen significant gains this year but has lost a substantial portion of its peak value since late May, with a current market capitalization of about $2 billion. SolarEdge is scheduled to release its third-quarter earnings on November 4th.