How A Leader Encuber The Industry? Solar's Tumble Day!

$SolarEdge(SEDG)$ saw its stock price drop below $200 earlier today due to disappointing Q2 earnings, lowered Q3 guidance, and a weak industry demand. These concerns have turned into reality, causing investors to worry and withdraw funds. Currently, SEDG has become a controversial investment target. Some believe it's a good time to buy at a low point, trusting that the company can overcome the crisis of reduced expectations. On the other hand, some think it's best to sell the stock, as short-term demand remains challenging to reverse.

This Israeli company sells microinverters, power optimizers, monitoring systems, and other solar technology components. SEDG investors typically hold an optimistic view of the global solar energy industry.

How deeply did the performance impact the company?

Well, its revenue grew 5% QoQ and 36% YoY, reaching a record-breaking $9.913 billion, with solar sector sales amounting to $9.474 billion, also at a record high, up 4% QoQ and 38% YoY.

The adjusted gross margin was 32.7%, slightly higher than Q1's 32.6% and significantly better than the 26.7% reported last year. The solar sector's gross margin was 34.7%, slightly down from Q1's 35% but substantially improved compared to last year's 28.1%.

Q2 net profit was $119.5 million, lower than the $138.4 million in the previous quarter and the $151 million in the same period last year. T

he company has lowered its Q3 guidance, projecting revenue in the range of $880 million to $920 million, below the market consensus of $1.05 billion. The expected adjusted gross margin for Q3 falls between 28% and 31%.

Cons:

The US residential solar market currently faces some resistance, mainly due to higher interest rates.

The company's inventory buildup and the potential decrease in battery shipments in the next quarter create an imbalance, as battery shipments have exceeded inverter supply, resulting in oversupply that needs to be addressed.

Pros:

Company has a backlog of C&I (Commercial and Industrial) orders, and the consistent foreign exchange trend provides some stability to the gross margin, along with an overall stable pricing strategy.

Additionally, Biden administration's unreserved support for clean energy initiatives and the potential positive impact of inflation reduction measures should benefit the company in the long run.

SEDG's performance has also dragged down other solar stocks $Invesco Solar ETF(TAN)$ like the $SunPower(SPWR)$ -7.7%, $Shoals Technologies Group(SHLS)$ -6.9%, $Sunrun(RUN)$ -6.1%, $Array Technologies Inc.(ARRY)$ -5.6%, $Enphase Energy(ENPH)$ -5.5%, $Maxeon Solar Technologies Ltd(MAXN)$ -4.7%, $Sunnova Energy International Inc.(NOVA)$ -4.4%, $JinkoSolar(JKS)$ -4.3%, $Canadian Solar(CSIQ)$ -3.9%, $Daqo New(DQ)$ -3.7%, $First Solar(FSLR)$ -3.6%.