Solar Stocks Plunge as SolarEdge Reports Weak European Demand
March 1, 2023
HILL COUNTY, TEXAS – The renewable energy sector took a hit today as solar stocks tumbled following a warning from solar product manufacturer SolarEdge. The company cited a significant weakening of demand in Europe, adding to the difficulties faced by the industry this year.
The Invesco Solar ETF (TAN) plummeted 8.5% before the bell, reaching its lowest level since July 2020. The ETF was set to open Friday’s trading session at $42.60. SolarEdge also experienced a sharp decline, with its stock falling nearly 28% in early trading. The company reported disappointing third-quarter results, missing revenue, gross margins, and operating income expectations. Furthermore, SolarEdge anticipates “significantly lower” revenue in the fourth quarter.
The struggles faced by the solar sector this year have been exacerbated by rising interest rates, which have negatively impacted the financing environment for U.S. solar installations. As of Thursday’s close, SolarEdge and the TAN ETF were down 59.7% and 35.9% year-to-date, respectively.
Goldman Sachs reacted to the news by double-downgrading SolarEdge from buy to neutral. The investment firm emphasized the weak demand environment in Europe and expressed concerns about the company’s prospects heading into 2024. Analyst Brian Lee stated in a note that the issues faced by SolarEdge, including ongoing inventory, end-market demand, and margin problems, are likely to hinder the stock’s performance in the foreseeable future.
The renewable energy sector was already grappling with challenges this year, and the latest blow from SolarEdge has further battered investor sentiment. The difficulties faced by the industry are a cause for concern, and analysts believe that the deteriorating visibility and weak European demand pose significant obstacles that need to be addressed.
CNBC’s Michael Bloom contributed to this report.
Chart: Solaredge, 1-day
Chart: Invesco Solar ETF (TAN)