Solar power systems company SolarEdge (NASDAQ:SEDG) reported Q4 CY2024 results topping the market’s revenue expectations , but sales fell by 37.9% year on year to $196.2 million. On the other hand, next quarter’s revenue guidance of $205 million was less impressive, coming in 1.3% below analysts’ estimates. Its non-GAAP loss of $3.52 per share was significantly below analysts’ consensus estimates.
Is now the time to buy SolarEdge? Find out in our full research report .
SolarEdge (SEDG) Q4 CY2024 Highlights:
“We are just getting started on our turnaround story. The return to positive free cash flow generation in Q4 is a solid first step, and we expect to be free cash flow positive in Q1 2025 and for the full year 2025,” said Shuki Nir, CEO of SolarEdge.
Company Overview
Established in 2006, SolarEdge (NASDAQ: SEDG) creates advanced systems to improve the efficiency of solar panels.
Renewable Energy
Renewable energy companies are buoyed by the secular trend of green energy that is upending traditional power generation. Those who innovate and evolve with this dynamic market can win share while those who continue to rely on legacy technologies can see diminishing demand, which includes headwinds from increasing regulation against “dirty” energy. Additionally, these companies are at the whim of economic cycles, as interest rates can impact the willingness to invest in renewable energy projects.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. SolarEdge’s demand was weak over the last five years as its sales fell at a 8.3% annual rate. This was below our standards and signals it’s a low quality business.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. SolarEdge’s recent history shows its demand has stayed suppressed as its revenue has declined by 45.4% annually over the last two years.
We can better understand the company’s revenue dynamics by analyzing its number of megawatts shipped, which reached 895 in the latest quarter. Over the last two years, SolarEdge’s megawatts shipped averaged 15.2% year-on-year declines. Because this number is higher than its revenue growth during the same period, we can see the company’s monetization has fallen.
This quarter, SolarEdge’s revenue fell by 37.9% year on year to $196.2 million but beat Wall Street’s estimates by 4%. Company management is currently guiding for flat sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 14.2% over the next 12 months, an improvement versus the last two years. This projection is admirable and suggests its newer products and services will spur better top-line performance.
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Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
SolarEdge’s high expenses have contributed to an average operating margin of negative 11% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.
Analyzing the trend in its profitability, SolarEdge’s operating margin decreased significantly over the last five years. The company’s performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers.
In Q4, SolarEdge generated a negative 134% operating margin. The company's consistent lack of profits raise a flag.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Sadly for SolarEdge, its EPS declined by more than its revenue over the last five years, dropping 47.8% annually. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
We can take a deeper look into SolarEdge’s earnings to better understand the drivers of its performance. As we mentioned earlier, SolarEdge’s operating margin declined by 194.5 percentage points over the last five years. Its share count also grew by 15.3%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For SolarEdge, its two-year annual EPS declines of 141% show it’s continued to underperform. These results were bad no matter how you slice the data.
In Q4, SolarEdge reported EPS at negative $3.52, down from negative $0.92 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects SolarEdge to improve its earnings losses. Analysts forecast its full-year EPS of negative $22.54 will advance to negative $2.80.
Key Takeaways from SolarEdge’s Q4 Results
We were impressed by how significantly SolarEdge blew past analysts’ revenue expectations this quarter. We were also glad it posted positive free cash flow and guided for more of the same in 2025 (both Q1 and full year). On the other hand, its EBITDA and EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter, but the stock traded up 8.5% to $18.38 immediately following the results because of the cash flow outlook.
Is SolarEdge an attractive investment opportunity right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free .
