SolarEdge Technologies Inc. (NasdaqGS: SEDG) shares plummeted Wednesday, dragging down solar sector-related exchange traded funds, after quarterly earnings results disappointed market expectations.
On Wednesday, the Invesco Solar ETF (TAN) declined by 2.9% and the Global X Solar ETF (RAYS) decreased by 4.5%.
Meanwhile, SolarEdge shares plunged 19.1% on Wednesday. SEDG makes up 10.0% of TAN’s underlying portfolio and 7.1% of RAYS.
The photovoltaic panels and inverters producer disappointed markets with an adjusted earnings of 95 cents per share for the second quarter, with revenue of $727.8 million falling short of consensus expectations.
Furthermore, market observers focused on the company’s poor outlook for international orders due to a strengthening U.S. dollar, or weakening foreign currencies like the euro, which recently hit parity against the USD.
“The growing demand for energy in general and clean energy, in particular, continued to drive top-line growth this quarter resulting in record revenues in Europe and the United States,” Zvi Lando, CEO of SolarEdge, said in a note. “While we continue to face growing supply chain challenges, some related to our rapid growth in an environment of component shortages, and macro-economic trends as a result of our global footprint, we continue to support our customers while building the infrastructure for sustainable growth.”
Nevertheless, some analysts remain optimistic, especially with increased demand for alternative energy or clean energy sources in face of rising costs of traditional fossil fuels. For instance, Needham’s Vikram Bagri maintained a “Buy” rating on SEDG, pointing to strong demand across Europe “where higher electricity prices have boosted solar’s attractiveness,” Barron’s reported.
“We would be buyers on what we see as a short-term impact on profitability,” “B. Riley’s Christopher Souther said in a note, maintaining a “Buy” rating on SEDG and adding that the Inflation Reduction Act could also support the stock’s outlook.
The latest Inflation Reduction Act includes a climate change component with tax credits for the solar panel industry to help promote the adoption of alternative or clean energy sources.
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