The European market is frozen, and profits have dropped by 90%! Behind the overnight collapse of this inverter company!

Although the decline in European PV and energy storage demand is within investors' expectations, it remains a mystery how much it will decline. Last Friday, SolarEdge (SEDG), an inverter company listed on the Nasdaq, crashed overnight, plummeting 27.2%!

01

Why did the US inverter sector suffer a bloodbath?

Before the market opened last Friday in the U.S., SolarEdge announced its third-quarter earnings forecast, causing the company's stock price to plummet 27.3% overnight, with the maximum intraday decline reaching 36.5%, while also bringing down the entire U.S. photovoltaic sector.

SolarEdge said it expects third-quarter revenue of $720 million to $730 million, lower than the agency's previous expectation of $880 million to $920 million, and expects gross margin to be 20.1% to 21.1%, compared with the previous forecast of 28% to 31%.

More importantly, the company's third-quarter operating profit may only be between $12 million and $31 million, significantly lower than the previous forecast of $115 million to $135 million.

Not only that, SolarEdge further stated that the company's revenue in the fourth quarter of this year will "drop significantly." The company will officially announce its third-quarter 2023 financial results on Wednesday, November 1, US time.

SolarEdge CEO Zvi Lando said that after entering the second half of the year, due to high inventory in Europe and continued slowdown in installation, the company's European distributors unexpectedly canceled orders in large numbers and began to destock continuously.

Landau further stated that the third quarter of each year is usually a sales quarter, but this year it has not increased but decreased. As an Israel-based company, the company said that the performance was lower than expected and had nothing to do with the ongoing Israeli-Palestinian conflict, as the company's production and operations have not been interrupted because of it.

In the past two years, SolarEdge's stock price has plummeted, with its market value falling by nearly 80% from its peak of $22 billion to only $4.7 billion now.

Affected by the negative news of SolarEdge, the US photovoltaic sector plummeted. The second largest decliner in the US photovoltaic sector that day was the famous micro-inverter company - Enphase Energy (ENPH), which fell 14.68%.

Enphase Energy can be regarded as the first overseas inverter stock, and has always been the benchmark and basis for the valuation of domestic A-share inverters. A year ago, Enphase Energy's market value was as high as more than 46 billion US dollars, but now it is less than 13.5 billion US dollars, equivalent to nearly 100 billion yuan. Among the global inverter listed companies, it is slightly inferior to Sungrow Power Supply in my country's A-shares.

The Invesco Solar ETF (TAN) plunged 6.57% on Friday, hitting its lowest level since July 2020, dragged down by two inverter companies. The U.S. solar sector generally fell due to pessimistic prospects.

02

S&P has already warned about the situation in the first half of the year

Last Friday, Goldman Sachs downgraded SolarEdge's rating from buy to neutral. SolarEdge said that the weak demand environment in Europe will cause greater problems for the company in 2024, and this is no longer just a seasonal issue.

On October 13, S&P Global Commodity Insights pointed out that the second quarter of 2023 was the worst quarter on record for household energy storage products, with global residential energy storage shipments declining for the first time - a year-on-year decrease of 2%.

Shipments to Europe slowed down, especially to Belgium and Spain, where shipments fell by more than 60% year-on-year, and the Italian market fell by more than 40%.

Data compiled in September 2023

Note: Data based on S&P Global’s quarterly survey of leading residential energy storage providers

Source: S&P Global Commodity Insights, Residential Energy Storage Index (RESI)

Now it seems that the second quarter data of this year from S&P Global Commodity Insights is not the worst, and the third quarter may not be the worst. In fact, for a long time to come, maybe every quarter will not be very good.

S&P Global Commodity Insights also pointed out that although the inventory level of household storage products has reached a historical high, a large number of companies in China, the main production area, have entered this market and rapidly expanded production capacity to achieve large-scale shipments.

Compared with the reality of slowing demand, this expansion trend will further aggravate Europe's high inventory levels. Problems have arisen in the household storage market, and weak demand for household photovoltaic inverters is inevitable.

03

SolarEdge, just dropped out of the top ten

Source: Wood Mackenzie

SolarEdge is an Israeli company that has been deeply engaged in household photovoltaic inverters in Europe and the United States for many years. It has a complete global sales channel and sales network. In European countries with developed household storage markets such as Germany, the Netherlands, and Italy, the number of SolarEdge channel partners ranks first among all inverter brands, and it has been ranked among the top ten in inverter shipments for many years.

SolarEdge was founded in 2006 and is headquartered in Delaware, USA. SolarEdge is the creator of the string + optimizer solution. It has patent barriers in the US for module-level shutdown and can achieve module-level remote shutdown. It currently owns relevant patents for this technology in the US market, making it difficult for other manufacturers to enter.

In March 2015, SolarEdge went public on the Nasdaq and raised $126 million. In May of the same year, SolarEdge worked with Tesla to develop an inverter to serve the home energy storage battery system launched by the latter at the time. However, as time went on, Tesla gradually terminated its partnership with SolarEdge and later launched its own solar inverter brand.

In 2019, after the company's founder Guy Sella unfortunately passed away from cancer, Zvi Lando, the company's vice president of global sales, was appointed CEO.

Market competition is fierce. In 2022, SolarEdge was no longer among Wood Mackenzie's top 10 inverter shipments.

Source: Wood Mackenzie

04

my country's inverter exports in September saw both volume and price decline!

When an avalanche occurs, no snowflake is innocent. If demand is weak, it will be difficult for Chinese inverter companies to become the winners of this competition.

Last week, China Customs released inverter export data showing that my country exported 647 million US dollars worth of inverters in September, down 32.7% year-on-year and 6.3% month-on-month. In the three months of the third quarter of this year, my country's inverter exports have been declining every month. The above is the export amount.

The export unit price of my country's inverters has also fallen to a certain extent. According to customs data, in September 2022, the average unit price of my country's exported inverters was US$190 per unit. In September this year, the average unit price has dropped to US$165 per unit.

The decline in both volume and price is a true reflection of my country's inverter export data in September. In fact, the stock price trend of my country's inverter A-share listed companies also reflects the market's expectations for the future.