On Tuesday, Goldman Sachs analyst Brian Lee increased the price target for SolarEdge Technologies (NASDAQ:SEDG) shares to $21.00 from $19.00, while reiterating a Buy rating on the stock. The upgrade comes as SEDG shares have shown strong momentum, posting a 19.78% gain over the past week.
According to InvestingPro analysis, the stock appears slightly undervalued at its current market cap of $944 million. Lee's optimism is based on several recent initiatives by SolarEdge that are expected to enhance the company's prospects.
SolarEdge recently disclosed a series of strategic moves, including securing safe harbor agreements with two major residential solar financiers, one of which is RUN. These agreements are aimed at leveraging U.S.-manufactured equipment to take advantage of investment and domestic content bonus tax credits.
Deliveries under these agreements are expected to occur throughout 2025. The partnership with RUN is significant due to concerns of SolarEdge potentially losing market share to Tesla (NASDAQ:TSLA), which has introduced its Powerwall 3 battery without SolarEdge inverters. InvestingPro data shows the company maintains a healthy current ratio of 2.34, though it faces challenges with negative gross margins of -69.33%.
In December, SolarEdge also completed its second sale of 45X production tax credits, which included credits accrued in the third quarter of 2024, eligible for a $0.11/watt credit for U.S.-made inverters and Power Optimizers. While the sale amount was not disclosed, the transaction is consistent with SolarEdge's strategy to sell 45X credits regularly and supports the company's fourth-quarter 2024 free cash flow (FCF) guidance, which may lead to positive FCF in the first half of 2025.
Additionally, SolarEdge has announced a further restructuring plan to reduce its workforce by 400 and cut overhead costs to improve operating efficiency. The company anticipates pre-tax charges related to the restructuring to be between $3 million and $5 million, primarily incurred in the first quarter of 2025.
This restructuring is expected to result in quarterly expense reductions of $9 million to $11 million, excluding the cost of implementing the plan. This marks SolarEdge's third restructuring in the past year and is projected to contribute to a total cost savings of approximately $17.5 million by the end of 2025, aiding the company's accelerated path to profitability.
SolarEdge will be presenting at the Goldman Sachs Energy, CleanTech & Utilities Conference later this week, where these positive developments are expected to be a focal point for investor discussions.
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