Why Analysts Are Having to Chase SolarEdge Earnings Higher

For the fiscal fourth quarter, SolarEdge expects revenues to be in the range of $92 million to $96 million and gross margins to be between 26% and 28%. The consensus estimates are EPS of $0.09 and $82.45 million in revenue.

For the most recent quarter, gross margin was 27.6%, up from 21.6% in the previous quarter and 20.5% in the third quarter of 2014. This growth was driven mainly by cost reduction measures, reduction in the portion of air shipments compared to ocean freight and economies of scale related to the increased production volumes.

Guy Sella, founder, chairman and CEO of SolarEdge, commented in the earnings report:

I am happy to report record revenues of $86 million this quarter. This is in line with our expectations of moderate growth despite seasonality, coupled with the addition of a new sizeable customer. We expect revenue growth to continue through 2015 as originally projected. Our increased manufacturing capacity allowed us to reduce air shipments and combined with our planned cost reduction activities, increased our gross margin. The result of these two factors drove non-GAAP net profit to $8.7 million for the quarter, our third consecutive profitable quarter. We continued to see strong growth in the United States and Europe both in the residential and commercial markets. In the past quarter, we continued development of energy storage solutions which we expect to bring to market toward the end of 2015.

At the end of March, cash, cash equivalents and restricted cash totaled $138.8 million, which includes net cash proceeds from the initial public offering (IPO) of $134.8 million, compared to $27.2 million at the end of December 2014. SolarEdge noted that at the end of the fiscal third quarter it did not have any debt.

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24/7 Wall St. previously touched on SolarEdge when its post-IPO quiet period came to an end.

Following the end of the quiet period on April 20, a few analysts initiated coverage on SolarEdge, but they have now had to readjust their price targets after earnings and are chasing the company even higher:

• Deutsche Bank has a Buy rating, and the firm moved its price target up from $29 initially to $35 after earnings.
• Needham initiated coverage with a Buy rating and a $30 price target, but now it has upped its price target to $38.
• Roth Capital initiated coverage with a Buy rating and a $30 price target, but after earnings the firm raised its price target to $35.

Shares of SolarEdge jumped to $32.00, a new post-IPO high, just after Friday’s opening bell. The stock has a post-IPO low of $19.49 and a mean price target of only $29.67.