SolarEdge Posts Record Revenues But Investors Unhappy
This article has been updated to include comment from Bloomberg Intelligence.
Israel-based solar PV inverter manufacturer SolarEdge announced its second-quarter earnings report last week in which it reported record revenues and shipments, but investors were unhappy and the company’s share price fell sharply on the back of the news.
SolarEdge posted its second-quarter revenues last week, reporting total revenue for the quarter of $227.1 million, up 8% on the $209.9 million posted in the previous quarter and up an impressive 67% from the same quarter a year earlier. The company posted a huge gross margin of 36.1% but missed analyst expectations for earnings per share by $0.02, but still at a respectable $0.82 EPS.
All in all, the company shipped a total of 985 megawatts of inverters, nearing the hallowed 1 gigawatt (GW) milestone that, based on recent growth, the company could easily pass next quarter. In the past year, the company has grown from shipping 563 MW in Q2’17, 676 MW in Q3’17, 766 MW in Q4’17, and 800 MW in the first quarter of 2018. SolarEdge also reported 2.7 million power optimizers shipped in the second quarter, up from 2.5 million in the first quarter and continuing strong growth over the past year.
“We ended the second quarter of 2018 with record revenues, stable operating income and continued strong cash generation while expanding our activities on all fronts,” said Guy Sella, Founder, Chairman and CEO of SolarEdge. “This continued growth in the solar market coupled with the announced acquisition of Gamatronic that paves our way into the UPS market allows us to continue and expand our mid and long-term profitability leveraging on our innovative technology and financial strength.”
The company has been posting successive quarterly revenue records of late, but even though this second quarter blew these previous records out of the water, investors weren’t impressed. The company’s share price fell by 14% on the back of the news.
SolarEdge is also embroiled currently in a patent infringement lawsuit with Chinese IT company Huawei, its German subsidiary, and the German distributor for Huawei WATTKRAFT Solar. According to SolarEdge, Huawei made unauthorized use of patented SolarEdge technology and the lawsuit was filed in an attempt “to protect SolarEdge’s significant investment in its innovative DC optimized inverter technology” and “to prevent the defendants from selling any multi-level inverters infringing upon SolarEdge’s PV inverter technology protected in the asserted patent in Germany.”
Unsurprisingly, Huawei denied all wrongdoing and said that it would “defend its rights vigorously.” Just this past week, Huawei told PV Magazine it insists it has not infringed any valid patent rights of SolarEdge and that it will continue to take all the necessary steps to defend itself and its customers.
While it is difficult to place the blame on any one aspect of the company’s earnings report, James Evans at Bloomberg Intelligence suggests that it might be a combination of factors. “We continue to believe that concerns about SolarEdge’s business threat from trade and Huawei’s market entry are overblown, yet this may not temper a near-term market reaction on slightly weaker margin performance in 2Q,” James Evans wrote for the Bloomberg Terminal last week. “Trade concerns are likely unjustified, with SolarEdge able to ramp up sufficient European capacity over two quarters to be able to supply its U.S. needs. Costs may nevertheless rise to cater for increased legal expenses over its Huawei action.”
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