SolarEdge Technologies faced a setback as it forecasted fourth-quarter revenue below Wall Street's expectations, causing its shares to drop by 22.3% in after-hours trading. The company, a prominent solar inverter manufacturer, cited weak demand for its products, with several factors contributing to the challenging market conditions.
One key factor affecting solar demand in Europe has been an excess of inventory, coupled with diminishing demand in crucial markets, primarily due to a scaling back of fossil fuel prices from their record highs of the previous year. In the United States, higher interest rates and a metering reform in California, the country's largest solar market, have also impacted the demand for solar installations.
SolarEdge's market capitalization has taken a hit this year, dropping by over half of its previous value. The company's outlook for the current quarter further compounded concerns, with a revenue projection ranging from $300 million to $350 million, falling far below analysts' estimates of $687.9 million, as reported by LSEG data.
The company had already revised down its third-quarter revenue expectations recently, attributing the adjustment to high inventory levels and a slowdown in installations. This slowdown resulted in significant cancellations and backlog clearing by European distributors during the quarter.
Additionally, SolarEdge reported an adjusted net loss of 55 cents per share for the quarter ending September 30, a stark contrast to analysts' expectations of a profit of 89 cents per share. CEO Zvi Lando acknowledged the challenges, stating, “The results for the third quarter fell short of our prior expectations and are reflecting a slow market environment.”
The company's third-quarter revenue of $725.3 million also missed estimates, which had projected $768.38 million. SolarEdge's forecast for the fourth quarter includes an adjusted gross margin expectation in the range of 5% to 8%.
Notably, SolarEdge's peer, Enphase, also anticipated a weak fourth-quarter revenue, indicating broader challenges in the solar industry.