Even though governments around the world have taken steps to ensure their countries’ transition to a renewable energy future, rising input costs and supply chain constraints are affecting the growth of the renewable energy sector. . Federal Reserve Chairman Jerome Powell said global supply chain problems could stay until 2022.
Guggenheim Partners analysts recently downgraded four solar values from “Buy” to “Neutral”, mainly due to concerns about rising costs of inputs, namely steel, aluminum, labor and panels. Furthermore, Kelsey Goss, Research Analyst at Wood Mackenzie, said, “There is a lot of uncertainty in the industry as they don’t know how strict the WRO enforcement will be, or currently is.”
Solar stocks downgraded by analysts at Guggenheim — SolarEdge Technologies, Inc. (SEDG), First Solar, Inc. (FSLR), Shoals Technologies Group, Inc. (SHLS) and Array Technologies, Inc. (ARRY) – appear to be significantly overvalued at their current price levels. We therefore believe that it is better to avoid these actions now.
SolarEdge Technologies, Inc. (SEDG)
Based in Israel, SEDG designs, develops and sells continuous current (DC) optimized inverter systems for solar photovoltaic (PV) installations worldwide. It offers inverters, power optimizers, communication devices and intelligent energy management solutions.
SEDG’s total operating expenses increased 37.9% year-on-year to $ 100.63 million for its fiscal second quarter ended June 30, 2021. In addition, the company’s cash and cash equivalents amounted to $ 524.11 million for the period ended June 30, 2021, compared to $ 827.15 million. for the period ended December 31, 2020. Its total current assets were $ 1.49 billion, compared to $ 1.72 billion for the same period. And its net income declined 4.7% year-on-year to $ 75.17 million for the six-month period ended June 30, 2021.
In terms of forward EV / S, SEDG’s 7.82x is 87.5% higher than the industry average of 4.17x. And its forward P / S of 8.06x is also 96.9% higher than the industry average of 4.09x.
The stock has lost 17.3% of its price since reaching its 52-week high at $ 377 on Jan.8, 2021, to close yesterday’s trading session at $ 311.92.
SEDG POWR odds reflect its poor outlook. It has an overall D rating, which indicates a sale. POWR ratings assess stocks based on 118 distinct factors, each with its own weight.
Additionally, the stock has a D rating for value, stability, sentiment, and quality. Click here to access additional POWR notes for SEDG (Momentum and Growth). SEDG is ranked 15th out of 18 stocks in the F ranking Solar industry.
First Solar, Inc. (FSLR)
Based in Tempe, Arizona FSLR provides solar photovoltaic (PV) energy solutions in the United States, Japan, France, Canada, India, Australia and internationally. It operates in two segments, Modules and Systems.
FSLR’s net sales decreased 21.7% sequentially to $ 629.18 million for the second quarter ended June 30, 2021. In addition, its gross margin decreased 5.8% sequentially to 174.12 millions of dollars. Its total liabilities and equity amounted to $ 7.25 billion for the period ended June 30, 2021, compared to $ 7.11 billion for the period ended December 31, 2020.
In terms of forward non-GAAP P / E, FSLR’s 28.50x is 14.7% higher than the industry average of 24.85x. In addition, its EV / EBIT before 20.31x is also above the industry average 20.25x. Analysts expect FSLR’s revenue to decline 5.3% in its 2022 fiscal year. And its EPS is expected to decline at a rate of 37.7% over the next year. It has lost 3.1% of its price since reaching its 52-week high at $ 112.50 on January 25, 2021, to close yesterday’s trading session at $ 109.04.
FSLR’s POWR ratings reflect its poor outlook. The stock has a D rating for growth and stability.
We also rated it for momentum, value, feeling, and quality. Click here to access all FSLR assessments. FSLR is ranked # 4 in the Solar industry.
Shoals Technologies Group, Inc. (SHLS)
SHLS in Portland, Tenn., Provides an Electrical Balance System (EBOS) solution for solar power projects in the United States. It offers EBOS components, such as cable assemblies, in-line fuses, combiners and others.
On August 30, 2021, SHLS agreed to work with Ernst & Young LLP (EY US) for Shoals’ electric vehicle (EV) charging system solutions. However, this move could have an impact on the already weak finances of the company.
For the six-month period ended June 30, 2021, SHLS net income decreased 94.4% year-over-year to $ 820,000. Its total liabilities and shareholder deficit / membership deficit amounted to $ 273.72 million for the period ended June 30, 2021, compared to $ 195.31 million for the period ended December 31, 2020. Its EPS is ‘is set at minus $ 0.01 during the January 27 period. , 2021, to June 30, 2021.
In terms of EV / forward sales, SHLS’s 12.17x is 504.6% higher than the 2.01x industry average. In addition, its forward P / S of 11.30x is 609.9% higher than the industry average of 1.59x of 1.59x.
Analysts expect SHLS’s EPS to decline 17.1% in fiscal 2021. Additionally, it has lost 24.8% of its price in the past six months to close the trading session. yesterday’s trading at $ 26.01.
SHLS’s POWR ratings are consistent with this grim outlook. The stock has an overall D rating, which equates to a sale in our proprietary rating system. Additionally, the stock has a D rating for stability and sentiment.
We also rated SHLS for growth, value, momentum and quality. Click here to access all SHLS notations. SHLS is ranked # 70 out of 91 stocks in the Industrial equipment industry.
Click here to view our industrial sector report for 2021
Array Technologies, Inc. (ARRY)
ARRY manufactures and supplies solar tracking systems and related products for customers in the United States and around the world. Its products include DuraTrack HZ v3, a single axis solar tracking system, and SmarTrack, a machine learning software. ARRY is based in Albuquerque, NM
On September 16, 2021, a a class action lawsuit has been filed in federal court against ARRY. Johnson Fistel, LLP is investigating claims on behalf of the company. The lawsuit alleged that the defendants had made false and misleading statements, thereby failing to adequately disclose the then existing increase in costs associated with certain supplies.
ARRY’s total current assets were $ 330.21 million for the period ended June 30, 2021, compared to $ 375.18 million for the period ended December 31, 2020. Its total assets were $ $ 622.32 million, compared to $ 656.02 million for the same period. And its gross margin declined 49.8% year-on-year to $ 70.64 million for the six-month period ended June 30, 2021.
In terms of forward EV / S, ARRY’s 3.24x is 61.2% above the industry average 2.10x. In addition, its forward P / S of 2.69x is also above the industry average of 68.8%.
ARRY’s EPS is expected to decline 76.3% in fiscal 2021 and 1.3% annually over the next five years. Additionally, the stock fell 38% of its price over the past six months to close yesterday’s trading session at $ 18.20.
ARRY’s POWR ratings reflect its poor outlook. It has an overall rating of D, which indicates a sale. Additionally, the stock has a D rating for stability.
Click here to access additional POWR ratings for ARRY (Momentum, Growth, Value, Sentiment and Quality). ARRY is ranked n ° 8 out of 18 solar stocks industry.
SEDG shares were trading at $ 311.50 per share on Tuesday afternoon, down $ 0.42 (-0.13%). Year-to-date, SEDG is down -2.39%, compared to a 23.39% increase in the benchmark S&P 500 over the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist passionate about the analysis of financial instruments. With a masters in economics, she helps investors make informed investment decisions with her insightful commentary. Following…