Will SolarEdge’s stock outlook brighten in 2022?

SolarEdge’s [SEDG] stock has dimmed ever since it missed Wall Street earnings expectations. In the third quarter, the solar installation company posted adjusted earnings of $1.45 a share on $526m in revenue. While that was record-revenue for the period, it missed the forecasted $528m.

Headwinds in the quarter included bottlenecks in the supply chain, although SolarEdge put a positive spin on this by suggesting it would be entering the next couple of quarters with a ‘record backlog’ of orders.

Following the results posted at the start of November, SolarEdge’s stock dipped 8% in extended trading.

Still, Wall Street still sees upside in SolarEdge’s stock, which could benefit in 2022 as the US government pumps millions into clean energy initiatives.

Wall Street sees upside in SolarEdge’s stock

Since hitting $368.33 on 15 November, SolarEdge’s stock has slumped almost 14.7% (through 7 December). Year-to-date, the stock is up just over 2%, a performance on par with rival First Solar [FSLR] but well behind Enphase Energy’s [ENPH] near 27% gain.

Having closed Tuesday at $325.83, SolarEdge’s stock could still see some upside based on November’s analyst price targets - even if how much upside depends on which analyst you ask.

Morgan Stanley’s Stephen Bryd downgraded SolarEdge from Overweight to Equal Weight last month, although he upped his price target to $338. Byrd said he didn’t see much more growth left in SolarEdge's stock after outperforming the wider index - see the Invesco Solar ETF [TAN] 16.05% slump.

Yet Byrd likes SolarEdge as a company saying it’s a "strong value proposition (via its highly patented core product solar PV inverter and power optimizer) as well as its strong global presence and track record of execution should allow the company to continue to gain market share in the fast growing solar market and to penetrate the stationary battery space."

“strong value proposition (via its highly patented core product solar PV inverter and power optimizer) as well as its strong global presence and track record of execution should allow the company to continue to gain market share in the fast growing solar market and to penetrate the stationary battery space" - Morgan Stanley Stephen Byrd

Growth could come over time as the company’s non-solar business expands, although Byrd notes that margins could come down.

Among the more bullish analysts is Wells Fargo’s Michael Blum who initiated coverage on SolarEdge with an Overweight rating and a lofty $441 price target. Blum reckons that SolarEdge will benefit in the long-term from an expansion of the residential and commercial solar markets.

Other optimistic price target changes in November include Concord upping its target from $280 to $345, Truist going from $345 to $395 and Citi moving its target from $360 to $435. Citi analyst J.B. Lowe suggests that despite fourth quarter guidance missing expectations, SolarEdge’s growth drivers remain intact.

Where next for SolarEdge’s stock?

One tailwind SolarEdge has got going for it - and the wider clean energy theme - is government investment. The $1.75bn ‘Build Back Better’ bill includes $555bn to pump into climate programmes.

The bill itself offers tax credits for the installation of renewable energy systems, including solar and wind, as well as for buying electric vehicles. It also provides financial incentives for domestic manufacturing of renewable technologies, such as solar panels and wind turbines. As part of Biden’s updated COP26 pledge, the US aims to slash greenhouse gas emissions at least 50% below 2005 levels by 2030.

SolarEdge’s stock has also gotten a boost from news that it will be included in the S&P 500 from 20 December.

Among the analysts tracking SolarEdge on Yahoo Finance, the stock has a $355.35 price target, suggesting a 9.2% upside on Tuesday’s close.