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  • Writer's pictureAbacus Research

SolarEdge

SolarEdge is a play on solar adoption, however it has a defendable business model and sells an advantaged product set. (Inverters, optimisers, EV chargers and batteries to residential and commercial solar installations)

The long-term visibility we are getting in solar makes it worth your time now. Big picture for us is that solar is winning for multiple reasons.

  • The Inflation Reduction Act (IRA) and the Russian issue in Europe coupled with net zero.

  • Solar plus storage is clearly disruptive and falling battery and solar prices along with high electricity prices and a desire to be energy independent is a very solid tailwind.

Short term: US is bad and could get ugly, but Europe is still booming

  • The US duopoly of ENPH and SEDG is well protected in our opinion.

  • In Europe, we believe SolarEdge will take share of the inverter market slowly

  • SolarEdge should be able to expand operating margins from 15% to ~18-19% over the next few years despite the higher growth in lower margin areas such as commercial and batteries.

  • Our upside scenario EPS estimate for 2025 is ~25% ahead of the street.

  • Now trading at 22x2024 EPS and growing earnings 2022-25 at 35%+, we think valuation is not stretched anymore.

Potential Upside: $430 (+50%)

Sensible Downside: $217(-24%)


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