Solar Stocks Plunge After SolarEdge’s Guidance Warns of Low Demand
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Solar Stocks Plunge After SolarEdge’s Guidance Warns of Low Demand

SolarEdge significantly reduced its Q3 outlook amid challenges in the European market, sending peers' stocks tumbling in the premarket.
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Shares of solar energy solution providers are significantly down in the Friday premarket after SolarEdge (NASDAQ: $SEDG) considerably reduced its Q3 guidance. The outlook cut comes amid a significant slowdown in the European market, pointing to persisting demand challenges. 

SolarEdge Cuts Q3 Revenue Outlook by $160 Million

Stocks of solar power companies are in the red in Friday premarket trading after one of the industry peers, SolarEdge, issued downbeat guidance for Q3 2023. The disappointing outlook raised concerns about the sector’s waning demand, sending multiple Nasdaq-listed stocks tumbling ahead of the market open.

SolarEdge’s stock fell 5.6% on Thursday and is currently down by an additional 26% in the premarket. Similarly, shares of its competitors, including SunPower (NASDAQ: $SPWR), Sunrun (NASDAQ: $RUN), and Enphase Energy (NASDAQ: $ENPH), are down 7%, 6.9%, and 15% in the market pre-open. 

The sharp sector sell-off came after SolarEdge set its guidance for Q3 revenue from $720 million to $730 million, significantly lower than the previous forecast range of $880 million to $920 million. Meanwhile, Wall Street analysts were projecting $909 million in third-quarter revenue. 

The cut was due to “substantial unexpected cancellations and pushouts of existing backlog from our European distributors” in the second part of the third quarter, said SolarEdge CEO Zvi Lando. The company is set to report its full Q3 results on November 1. 

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SolarEdge Expects Lower Revenues in Q4 Too

Further in the guidance update, SolarEdge said swollen inventories and slower-than-expected installation rates in the European market caused the cancellations and pushouts. The slowdown occurred at the end of summer, when installation rates typically rise, pointing to clear demand headwinds. 

As a result, the Israel-based firm also substantially reduced its operating income guidance for Q3 to bet between $12 million and $31 million from the previous $115 million to $135 million range. Adjusted gross margins are now expected to range between 20.1% and 21.1% in the current period, down from the earlier forecast range of 28% to 31%. 

SolarEdge said it expects weaker revenues in Q4 as well. 

“Additionally, the Company anticipates significantly lower revenues in the fourth quarter of 2023 as the inventory destocking process continues,” SolarEdge said. The company also said the adjusted outlook is unrelated to the recent Middle East conflict. 

Meanwhile, the demand for solar power products slumped in the US due to a high-interest rate environment and unfavorable state solar policies.

Do you think the slow demand in the solar power sector is only a temporary blip or a long-term challenge? Let us know in the comments below.