Please ensure Javascript is enabled for purposes of website accessibility

Why SolarEdge's Shares Plunged 17.9% on Monday

By Travis Hoium - Mar 9, 2020 at 4:57PM

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

The market collapse didn't spare renewable-energy stocks.

What happened 

Shares of SolarEdge Technologies (SEDG 4.08%) plunged as much as 17.9% in trading on Monday, as the entire market had one of its worst days ever. At the close of trading, shares were down 16.3%. 

So what

There's no question that the overall drop in the market was the main cause of SolarEdge's fall. But solar companies are being affected by macro trading trends as well. Oil fell 25% today, and the fortunes of the solar industry are often perceived to be tied to oil. Higher oil prices make people think about buying an electric vehicle or putting solar panels on their home, and the opposite is what we saw today. 

Roof with large solar system.

Image source: Getty Images.

The reality is that solar energy isn't correlated with oil prices at all, especially in the residential market that SolarEdge serves. In fact, if the economy takes a turn for the worst, homeowners may look for ways to save a few dollars a month. Solar can help do that. 

Now what

I wouldn't be worried about SolarEdge's business in the long term after today's drop, but it's hard to argue that this renewable-energy stock is a great value. Shares trade at nearly 39 times trailing earnings and nearly 4 times sales. That's expensive for a manufacturing company in the competitive solar market. But if the stock continues to fall and the price-to-earnings ratio comes down to a more reasonable level, it'll make shares much more compelling to long-term investors. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SolarEdge Technologies, Inc. Stock Quote
SolarEdge Technologies, Inc.
$273.68 (4.08%) $10.72

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

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