Goldman Sachs upgrades SolarEdge to ‘buy’ on recovery hopes

Investing.com -- Goldman Sachs upgraded SolarEdge Technologies Inc (NASDAQ:SEDG) to buy from sell, on early signs of a recovery and the company’s shrink-to-grow restructuring strategy, which is expected to stabilize its balance sheet.

The brokerage raised its 12-month price target to $19 from $10, a nearly 35% upside.

Goldman noted that investor fears over SolarEdge's liquidity and its ability to address the $350 million debt due in 2025 are overblown. The company’s ongoing cost-cutting measures, including headcount reductions and operational efficiencies, are expected to alleviate its free cash flow concerns. This, combined with improving product mix, could provide a near-term boost to margins and earnings.

The brokerage also highlighted broader growth trends in the solar market as supportive of SolarEdge’s recovery. Goldman expects a return to growth in residential solar installations in 2025, particularly in the U.S. and Europe, which are key markets for SolarEdge.

A recovery in utility-scale solar installations, coupled with rising power demand, could further lift sector sentiment.

Even with near-term challenges from policy uncertainty and competition, Goldman sees SolarEdge’s restructuring efforts as a turning point.

It sees an improving earnings momentum by late 2025, with a sharper acceleration in 2026 as cost efficiencies take hold and demand stabilizes. Goldman also views current valuations attractive, with significant upside if execution improves