Why It’s Suddenly Highly Volatile!

SolarEdge (WKN: A14QVM) is one of the few solar stocks that has good investment quality. Sales are increasing rapidly and the company has been making money for many years. Last year (2021), profit increased to $169.17 million, which is a major reason for the previous price increase. In addition, the company has little debt with an equity ratio of 53.7%.

SolarEdge is vulnerable to correction

On the Nasdaq, SolarEdge shares have already risen more than 1,396% since 2015 (08/04/2022). Many investors who only watch prices are being attracted by this development right now. But they have already missed the big upswing. A correction rather than another rise could be on the cards for now.

The cause is the current stock overvaluation and now, for the first time in many years, falling profits. In the second quarter of 2022, it fell 66.5% to $15.1 million. One reason is currency effects. SolarEdge generates around 34.1% of its sales in Europe, and the trend is rising. If you add the specially designated Netherlands region, the figure is already 45.4%. In Europe, demand has risen sharply due to rising energy prices. But at the same time the euro lost value.

In addition, SolarEdge barely raised prices, which hurt profits. At the same time, high inflation is leading to rising costs, with supply chain difficulties also contributing.

The situation and the share could therefore only calm down again when the euro-US dollar exchange rate normalizes. However, it is questionable whether Europe will follow American interest rate trends, since the risk of recession is higher here than in the USA.

SolarEdge missed analyst estimates with earnings per share of $0.95 in the second quarter of 2022. Revenue, while up 51.6% to $727.8 million, also missed the market’s expectation of $730.7 million.

There is also a weaker outlook. SolarEdge expects a margin that will be around 0.5 percentage points lower in the third quarter of 2022, which the company also attributes to the euro-US dollar exchange rate.

The share initially reacted with a fall in price, only to rise again today (08/04/2022).

volatility and hope

The volatility of the share price has increased sharply in the last two years (2021, 2022). This usually indicates that large investors are selling blocks of shares while speculators are allowing the price to rise again.

However, there is hope that a new Mexico plant will soon be up and running. SolarEdge is looking to implement price increases in the second half of 2022 that could offset rising costs. In addition, the adoption of a climate support program in the amount of 369 billion US dollars is now very likely in the USA. SolarEdge also benefits from this.

The article SolarEdge Stock: Why It’s Suddenly Highly Volatile! first appeared on The Motley Fool Germany.

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Christof Welzel does not own any of the shares mentioned. The Motley Fool does not own any of the stocks mentioned.

Motley Fool Germany 2022

Source: de.finance.yahoo.com

Author: Rave

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