Shares of SolarEdge Technologies (SEDG 2.82%) rocketed 46% in May, according to data provided by S&P Global Market Intelligence. Powering the surge in the solar stock was the continued improvement in its financial results. The company also launched an innovative solution to help customers reduce emissions and costs.
The turnaround is starting to take hold
SolarEdge has battled a barrage of headwinds in recent years that have significantly impacted its growth and financial results. It has taken several steps over the past couple of quarters to turn things around. For example, it closed its energy storage division last November. The company also hired Shuki Nir as its new CEO in December. He initially came aboard last June as the chief marketing officer.
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The solar company made steady progress in its turnaround efforts in the first quarter. It reported $219.5 million in revenue, which was up 12% from the fourth quarter and 7% higher than the year-ago period. The company also delivered its second straight quarter of producing positive free cash flow ($19.8 million in the first quarter). That increased the company's net cash position from $81.9 million to $113.2 million. In commenting on the quarter, Nir stated he was "pleased with the steady progress we made on the SolarEdge turnaround this quarter."
The company expects to continue making progress on its turnaround in the second quarter. It sees its revenue rising to a range of $265 million to $285 million. Meanwhile, it sees its gross margin improving to a range of 8% to 12% (up from 7.8% in the first quarter) despite an anticipated 2% impact from new tariffs.
SolarEdge also continued to make progress in its strategy to grow its core solar business by launching a new solar-powered electric vehicle (EV) charging solution last month. The product will help significantly reduce EV charging fleet costs for businesses. It builds upon the company's other solutions to enable it to offer customers an increasingly comprehensive and integrated energy ecosystem.
Is SolarEdge a buy after last month's surge?
Despite rallying 46% last month, shares of SolarEdge are still down a staggering 95% from their all-time high from a few years ago. That's because the company's financial results have a long way to go before recovering from where they were. SolarEdge's revenue has plunged from an average of $3 billion annually in 2022 and 2023 to around $900 million last year. Meanwhile, its growth margin has cratered from the mid-20% range to a negative percentage before recovering to a high-single-digit level in the first quarter. If the company continues to turn things around, its stock price could have much further to run. However, it faces a lot of competing pressure and new headwinds from tariffs that could impact its ability to complete its turnaround.
