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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