SolarEdge Technologies (NASDAQ: SEDG) The stock gained almost 12% early on Friday morning before the manufacturer of inverters for solar modules pulled out around noon. As of 11:45 a.m. EST, the shares are still holding on about a 7% gain.
For that, you can probably thank the friendly analysts at investment bank Piper Sandler.
This morning, Piper Sandler started reporting on SolarEdge with an overweight rating and a target price of $ 325, implying a further upward movement of 11% over the current price of the stock. The upgrade follows an increased price target from investment bank JP Morgan, which raised its share rating to USD 315 on Wednesday.
In Wednesday’s release, JP Morgan argued that while solar stocks like SolarEdge are trading against “elevated” valuations, those valuations are warranted as the US government prepares to “aggressively” support the renewable energy industry in 2021. Piper Sandler agrees, by the way, adding that SolarEdge holds the leading position in solar inverters and power optimizers, which would make it a logical beneficiary of any big government to come.
Result: Piper sees “robust potential” for investors in the SolarEdge share and assumes that the company could increase sales by 15% to 25% annually in the future.
Believe it or not, that’s actually the conservative view on Wall Street, where analysts polled by S&P Global Market Intelligence believe SolarEdge will grow its earnings by a steep 30% over the next five years.
Even if these analysts are right, the real question is whether the 15%, 25%, or 30% growth is fast enough to warrant valuing the stock. With a market cap of $ 15 billion, SolarEdge stocks currently cost nearly 86 times trailing earnings and nearly 97 times trailing free cash flow.
Personally, that’s too rich for my blood – no matter how good the analysts say this company is.