Solar Stocks Continue to Struggle

Solar stocks are facing yet another setback, as SolarEdge receives a downgrade and SunPower unveils a new cost-saving plan.

Decline in Solar Stocks

On Wednesday, solar stocks experienced another decline, with the Invesco Solar ETF dropping by 3.3%. One contributing factor to this decline was the downgrade of SolarEdge Technologies stock by Barclays, which downgraded the stock from Equal Weight to Underweight.

Downgraded Stock and New Price Target

Barclays analyst Christine Cho also reduced her price target for SolarEdge to $50 from $74, suggesting a potential 31% drop from the stock’s most recent closing price of $72.83 on Tuesday.

Cho expressed concerns about SolarEdge's future prospects, particularly in terms of top-line growth, gross margins, and market share. While she prefers Enphase Energy in the solar space, she believes it is still too early for traders to invest in solar. Cho rates Enphase as Equal Weight with a $106 price target.

Lowest Close in Nearly Two Years

As a result of this downgrade, shares of SolarEdge fell 4.9% to $69.30. This would mark the lowest closing price for the stock since August 2019, according to Dow Jones Market Data. In contrast, the S&P 500 experienced a 0.6% decline.

Continued Struggles for Solar Stocks

Over the past 12 months, the Invesco Solar ETF has seen a significant 48% decrease. The high interest rates have made financing home projects, such as solar panel installations, more expensive, impacting demand within the industry. As a result, solar companies are still grappling with the challenges posed by these circumstances.

SunPower Announces Restructuring Plan to Combat Weakened Demand for Solar Energy

SunPower, a prominent player in the solar energy industry, has recently revealed its latest strategy to address the negative impacts caused by a decline in demand. In a filing submitted to the Securities and Exchange Commission, the company outlined a comprehensive restructuring plan aimed at reducing operational expenses following a slowdown in sales.

The implementation of this restructuring initiative is scheduled to conclude by the end of the third quarter of fiscal year 2024 for SunPower. During this period, the company anticipates incurring approximately $12.8 million in restructuring charges, which will predominantly be allocated towards severance benefits amounting to about $8.2 million. Unfortunately, there is no information available regarding the exact number of job cuts resulting from this plan.

In addition to the restructuring efforts, SunPower faces an imminent deadline of January 19th regarding a temporary waiver in relation to a loan agreement. The company recently disclosed that it had violated a credit agreement due to the postponement of its third-quarter financial results.

Analyst Vikram Bagri from Citi emphasized the crucial role TotalEnergies plays as a major stakeholder in determining a favorable resolution for SunPower's immediate liquidity concerns. However, Bagri also stated that resolving these short-term challenges may not fully address the long-term hurdles confronting SunPower. Consequently, he revised his price target for SunPower's stock from $4 to $3 and upheld his Sell rating.

At present, TotalEnergies has not provided any comments or responses regarding this matter.