Jefferies Upgrades SolarEdge Rating#
Jefferies, a financial services company, has upgraded SolarEdge's rating from "Underperform" to "Hold." This change comes as renewed volatility in European energy markets, linked to ongoing conflicts in the Middle East, is expected to support demand for solar energy solutions. In premarket trading, SolarEdge shares saw a 4% increase.
Impact of Rising Energy Prices#
The surge in natural gas prices following the Russia-Ukraine conflict has previously driven a significant increase in solar adoption across Europe. SolarEdge's regional revenue skyrocketed from $630 million in 2020 to $1.9 billion in 2023. The TTF benchmark, which measures European gas prices, has risen approximately 94% since the latest conflict began, potentially encouraging households and businesses to seek more stable energy alternatives like solar power.
Future Demand Expectations#
While Jefferies anticipates a rebound in demand for solar energy, they expect it to be more moderate compared to the explosive growth seen between 2020 and 2023. This is due to the already high penetration of renewable energy sources and relatively stable power prices, despite the rising costs of gas. Jefferies believes that SolarEdge's earnings outlook is improving, aided by stabilizing conditions in Europe after a period of inventory adjustments.
Revenue Forecasts and Market Position#
Jefferies has also raised its revenue forecasts for SolarEdge, predicting increases of 17% and 19% for 2027 and 2028, respectively. However, the forecast for 2026 remains largely unchanged as customers adopt a cautious approach amid ongoing uncertainties. Despite the upgrade, Jefferies refrained from issuing a "Buy" rating, citing concerns over valuation. SolarEdge shares have appreciated about 60% this year and currently trade at around 18 times the estimated EV/EBITDA for 2027, slightly above its competitors, indicating that the market may already be factoring in expectations for stronger demand and market share growth.