Solaredge (SEDG) stock has had a horrible 1 year losing nearly 90% of its value. The company which engages in the development of inverter solutions is struggling with profitability.
Earlier this week, SEDG announced it was laying off 400 employees to streamline operations, save costs, and as a result improve profitability. Along with the reduction in headcount, the company will also reduce discretionary spending.
While the effect of laying off is intended to be financial stability, the cause lies in the market conditions. The reduction in demand in late 2023 and early 2024 meant the company was sitting on excess inventory, especially in Europe.
Solar stocks tumble due to the Trump effect
Donald Trump isn’t exactly a fan of clean energy. He even called it a scam, saying it was just a plan to make China rich.
So when the odds of Trump winning the elections improve, solar stocks are naturally going to take a beating. There was carnage across the solar sector when Donald Trump survived an assassination attempt.
But how bad is Trump for clean energy? One can understand his policies may not favor solar stocks as much as before. But it is also unlikely that he announces an all-out war against the sector.
It is therefore likely that the negatives of an eventual Trump presidency are priced in with the current dip.
Reasons to be bullish
Earlier this month, Sunnova CEO John Berger predicated a large demand pickup for solar power companies. Like SEDG, Sunnova stock has also struggled this year and is down 60% YTD.
This is what the CEO had to say regarding demand pickup:
We’re seeing a lot of investment, billions and billions of dollars in solutions the Inflation Reduction Act is supporting. IRA, in terms of majority, especially tax credits, will stay on hold regardless of who wins the White House.
It is clear from the CEO’s words that he doesn’t see any big shift in policy even if Trump wins.
Deutsche Bank analyst Corrine Blanchard also believes elections will have a limited impact on solar stocks. She believes the 45X tax credit and 301 tariffs are safe no matter who wins the elections. Even though a Trump administration may be more risky and unpredictable, major changes are unlikely.
She also thinks once interest rates come down and macro conditions improve, demand will really pickup.
Watch here: https://www.youtube.com/embed/MAljjquYeyE?feature=oembed
Testing an old support area
Looking at the chart, the stock has just reached an area of interest.
The current price of the stock was a resistance area 8 years ago, which then turned into support which was successfully tested twice in 2018 and once in 2019.
Now the stock has come back to those levels and is likely to stay here till the evidence of increased demand comes in.
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