TD Cowen Downgrades SolarEdge, Stock Drops 4%

SolarEdge Technologies (NASDAQ:SEDG) shares dropped more than 4% intra-day today after TD Cowen downgraded the company to Hold from Buy, citing persistent challenges in European markets that are expected to delay the company’s recovery in terms of volume, margins, and free cash flow. Along with the downgrade, TD Cowen also slashed its price target for SolarEdge to $16, reflecting weakened demand in Europe, which is likely to prolong the company’s path to achieving $550 million in quarterly revenue and returning to positive free cash flow.

SolarEdge has been significantly impacted by deteriorating market conditions in Europe, particularly in Germany, where residential solar installations dropped by 29% year-over-year in the third quarter of 2024. With Germany accounting for 23% of SolarEdge’s 2023 revenue, the decline in demand has become a substantial obstacle. In addition, TD Cowen pointed out elevated inventory levels in Europe, which are expected to continue dragging on performance well into 2025.

The firm also highlighted increased pricing pressure from Chinese competitors, which have been capturing a larger share of the European market. TD Cowen’s survey showed that European distributors remain heavily reliant on Chinese-manufactured inverters, with 40-60% of inventory consisting of Chinese products, exacerbating SolarEdge's pricing challenges.

Looking forward, TD Cowen now expects a delayed recovery in revenue and margins, pushing the anticipated rebound to the fourth quarter of 2025, compared to previous estimates of a turnaround by the second quarter. However, the return to positive free cash flow is still expected in the latter half of 2025.