What happened

Shares of solar energy stock SolarEdge (NASDAQ:SEDG) closed Thursday trading down 9.8%, and its peer, solar inverter-maker Enphase Energy (NASDAQ:ENPH), declined a similar 10.2%. The reason: Both stocks were targeted in a short report from Citron Research today. 

So what

In the course of talking up the prospects of yet a third stock -- Waukesha, Wisconsin-based power-generation equipment producer Generac Holdings (NYSE:GNRC) -- noted short-seller Citron explained how Generac "is a major new competitive entrant" in the field of solar inverters.

Solar panel with sun rising in the background.

Image source: Getty Images.

Far from considering the company's newness to this market a disadvantage, however, Citron argued that "Generac ... has taken No. 1 market share in every market it enters." The implication is that it will similarly take over the market for solar inverters with ease. (Solar inverters are devices that convert direct current energy from solar arrays into alternating current electricity used by consumers).

Now what

Generac, says Citron, "has the resources and track record to make a huge dent in both SEDG and ENPH's market shares, but given that the company is followed by zero solar analysts, GNRC's commercial launch that was announced last week has gone completely unnoticed."

Once Generac begins taking share, however, Citron predicts that SolarEdge stock will quickly tumble 33% to 34% in price to as low as $51 per share, while Enphase stock will sink 70% to 75%, falling to just $6 or $7 a share over the next six to 18 months.

No wonder investors are spooked!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.