Please ensure Javascript is enabled for purposes of website accessibility

Why SolarEdge Technologies Inc.'s Shares Plunged 12.5% Today

By Travis Hoium – Nov 2, 2018 at 8:57AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Sometimes an earnings beat isn't enough for traders.

What happened 

Shares of solar industry supplier SolarEdge Technologies Inc. (SEDG 1.40%) fell as much as 12.5% in trading Friday after reporting third-quarter results. At 2:40 p.m. EDT, shares were still down 8.5% on the day.

So what

By almost any measure, last quarter was very impressive for SolarEdge. Revenue was up 42% to $236.6 million, and net income jumped from $28.0 million a year ago to $45.6 million. On a non-GAAP basis, which pulls out one-time items, earnings were $0.86 per share, beating estimates by four cents. 

Home with a large solar installation.

Image source: Getty Images.

Guidance also looked strong, with management expecting $245 million to $255 million in revenue and a GAAP gross margin of 30% to 32%, down from 33% in the third quarter. 

Now what

Sometimes stocks react strangely to good earnings reports, and that's what I'm seeing with SolarEdge. The company beat estimates and showed strong growth on the top and bottom lines, but that still wasn't enough for investors. I think the concern today is the possibility that margins are steadily shrinking, which will eventually result in lower profitability. But the reaction today seems to be overdone, and I see today's dip as a great buying opportunity for long-term investors. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.