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Why SolarEdge Technologies Stock Plunged 15.7% Today

By Travis Hoium - May 4, 2021 at 2:55PM

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Earnings may not be what investors were looking for.

What happened 

Shares of solar energy company SolarEdge Technologies Inc (SEDG 0.96%) fell as much as 15.7% in trading Tuesday after reporting first-quarter 2020 financial results. At 2:30 p.m. EDT, shares were still down 15% for the day. 

So what

Revenue fell 6% versus a year ago to $405.5 million, and net income dropped from $42.2 million to $30.1 million, or $0.55 per share. On a non-GAAP basis, earnings were $0.98 per share. Results actually topped the $396.2 million in revenue that analysts expected and fell just $0.01 shy of earnings estimates.

Home with solar panels on the roof on a sunny day.

Image source: Getty Images.

For the second quarter of 2021, management expects revenue of $445 million to $465 million, with non-GAAP gross margin of 32% to 34%. This would be down from a 36.5% non-GAAP gross margin in the first quarter. 

Now what

SolarEdge's results weren't terrible, but with shares trading at eight times revenue, investors are expecting a lot of growth from the company. And right now, revenue is going in the wrong direction.

I would also be concerned with margins, as cost pressures hit the electronics industry. Solar companies have limited pricing power, so we could see margin contraction if costs go up, and that may be something investors are taking more seriously today. 

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