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Why SolarEdge Technologies Inc. Shares Plunged 18% Today

By Travis Hoium - Aug 3, 2018 at 3:21PM

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Sometimes a high growth rate isn't high enough for investors.

What happened 

Shares of SolarEdge Technologies Inc. (SEDG -1.78%) plunged as much as 17.5% in trading Friday after the company reported second-quarter earnings. There wasn't much of a recovery late in the day, and shares were down 15.3% as of 3:40 p.m. EDT. 

So what

Revenue rose 67% to $227.1 million, and net income was up 53% to $34.6 million, or $0.72 per share. On a non-GAAP basis, which pulls out one-time items, earnings were $0.82 per share, which fell well short of the $0.90 expected by Wall Street. 

Large roof with solar panels.

Image source: Getty Images.

Third-quarter guidance was for revenue of $230 million to $240 million, which is better than the $227.9 million expected by analysts, but that didn't ease investor fears too much. 

Now what

One of the challenges with high growth stocks is that investors don't know quite how fast they will grow. In this case, SolarEdge is growing extremely quickly at 67%, and earnings are surging as well. But analysts and investors had been pricing in a higher rate of growth, so there's nothing fundamentally wrong with the business. Investors had just priced in too much growth previously, and that's why shares are falling to earth. 

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