Yahoo Finance SolarEdge stock tanks on 'abrupt slowdown in demand,' inventory backlog
SolarEdge (SEDG) stock sank around 14% on Wednesday after the company posted weaker-than-expected revenue guidance for the current quarter due to a slowdown in residential demand and increasing inventories.
The maker of inverters, which convert solar power into usable energy, expects first quarter revenue in the range of $175 million to $215 million versus Wall Street expectations for $373.2 million.
"We continue to face challenges from general market dynamics as well as the inventory levels of our products in the channels due to the abrupt slowdown in demand in the second half of 2023," CEO Zvi Lando said during the company's fourth quarter earnings call.
Executives noted weakness across Europe and the US residential market, where product sell-through — the quantity sold of the available inventory — was down 8% year over year.
"We do not expect significant changes in the residential market dynamics in the US until such time as interest rates decline," said Lando.
Higher rates have impacted the renewable sector because projects are capital-intensive. The Department of Energy estimates about 85% of residential solar systems in the US are financed.
A slowdown in California, the largest US solar market, has also contributed to the current installation weakness. A policy change in the Golden State last year reduced the amount of money credited to panel owners for sending excess power they generate into the grid, removing a key incentive.
SolarEdge expects the US commercial segment, which hit record levels in the fourth quarter, to continue growing as companies pursue net-zero pledges and take advantage of government incentives provided by the Inflation Reduction Act.
The company expects a gradual improvement in installation rates in Europe in the first quarter for both residential and commercial segments along with a clearing of inventory.
SolarEdge announced cuts to roughly 16% of its workforce last month. The stock fell 66% last year as renewables took a beating.
The Invesco Solar ETF (TAN) is 14% lower since the start of the year as headwinds continue across the industry.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
