SolarEdge (SEDG) could show if solar power can make money. SolarEdge manufactures many infrastructure products for solar-electric systems.
SolarEdge products include electric-vehicle (EV) charging inverters, smart EV chargers, Energy Hub Inverters, Backup Interfaces, Single Phase Inverters, Three Phase Invertors, Monitoring Platforms, Module Ad-Ons, and Embedded Power Optimizers for Smart Modules. They design many of those products to increase the electricity output of photovoltaic arrays.
Thus, SolarEdge Technologies Inc. (NASDAQ: SEDG) manufactures the components utilities and companies such as Tesla Energy (NASDAQ: TSLA) need to commercialize solar. SolarEdge is an Israeli company that domiciles in the United States to list on the NASDAQ.
Is there a Solar Energy Bubble?
I think SolarEdge’s stock price shows there could be a solar technology bubble in today’s overheated stock market.
Notably, SolarEdge’s share price has more than doubled in 2020. Mr. Market paid $101.81 for SolarEdge (NASDAQ: SEDG) shares on 2 January 2020 and $232.00 for SolarEdge on 5 November 2020. Incredibly, SolarEdge’s share price tripled to $309.10 on 19 October 2020 before collapsing to $202.47 on 2 November 2020.
I think the US presidential election could impact SolarEdge’s share price. To explain challenger Joe Biden (D-Delaware) has trumpeted a $1.7 trillion scheme to boost the use of green energy, including solar.
I think SolarEdge’s stock price exploded in mid-October 2020 when many pundits were predicting a Biden victory. However, SolarEdge’s share price fell as some observers began predicting another surprise victory by President Donald J. Trump (R-Florida). Many Americans view Trump a friend of Big Oil and fossil fuels.
Predictably, SolarEdge shares rose to $232 on 5 November 2020 as the Associated Press began predicting a Joe Biden victory. Hence, a Trump win could cause SolarEdge’s stock to collapse. Conversely, a Biden victory could boost SolarEdge.
Thus, I believe there is a solar-technology bubble that politics drives. Hence, smart investors need to avoid solar stocks because of the irrational factors driving the price.
Does SolarEdge Make Money?
SolarEdge (SEDG) makes some money. For instance, SolarEdge reported a quarterly operating income of $29.96 million on 30 June 2020. That quarterly operating income fell from $67.78 on 31 March 2020.
In addition, SolarEdge reported a quarterly gross profit of $102.96 million on 30 June 2020. The quarterly gross profit fell from $140.01 million on 31 March 2020. They based the quarterly gross profit on $431.22 million on 31 March 2020 that fell to $331.85 million on 30 June 2020.
In addition, SolarEdge reported a quarterly operating cash flow of $59.31 million on 30 June 2020. SolarEdge’s quarterly operating cash flow fell from $107.75 million on 31 March 2020.
SolarEdge reported a quarterly ending cash flow of $104.30 million on 30 June 2020. The quarterly ending cash flow fell from $324.07 million on 31 March 2020. SolarEdge borrows some money.
It reported a quarterly financing cash flow of $3.31 million on 31 March 2020 to $5.68 million on 30 June 2020. In addition, SolarEdge reported an investing cash flow of $46.80 million on 30 June 2020.
SolarEdge had $546.97 million in cash and short-term investments on 30 June 2020. That number rose from $454.81 million on 31 March 2020.
Mr. Market Grossly Overvalues SolarEdge
SolarEdge’s value is tiny. It reported Total Assets of $1.606 billion on 30 June 2020.
Ultimately, I think Mr. Market grossly overvalues SolarEdge because I see nothing in the financials that justifies the $231.87 November 5, 2020, share price.
I advise everybody to avoid SolarEdge (SEDG) because Mr. Market overprices. I think SolarEdge’s stock is in a bubble that will collapse.
What Future Does Solar Power Have?
Solar electric is a growing industry in the United States. The Solar Energy Technologies Office (SETO) claims US solar energy generation grew from three Gigawatts in 2011 to 47 gigawatts in 2017. To elaborate, a Gigawatt is one billion watts of electricity.
In addition, solar energy costs are falling. SETO claims the cost for a kilowatt-hour of utility-scale photovoltaic (PV) solar power fell from 28₵ in 2013 to 6₵ in 2017. Plus, SETO claims cost targets for residential- and commercial-scale solar have dropped from 52₵ to 16₵ and from 40₵ to 11₵ per kilowatt hour.
SETO claims American solar electricity generation costs are now close to the cost for traditional fossil-fuel burning power or base-load plants. SETO estimates base-load electricity costs at 5₵ per kilowatt hour.
SETO is the US Department of Energy agency in charge of promoting solar power adoption. I think SETO’s data shows why utility operators such as Berkshire Energy, part of Berkshire Hathaway (BRK.B) are adopting solar power. Solar prices are falling and solar could become one of the cheapest kinds of energy.
For instance, solar requires no delivery system for fossil fuels, smokestacks to dispose of emissions or payments to fossil-fuel producers. SolarEdge could profit from cheaper solar because utilities will need infrastructure to generate solar electricity. Thus, SolarEdge could benefit from a growing utility market.
Is Solar Power Doomed?
Solar power’s future seems bright, but there are some challenges on the horizons. The greatest of these challenges is political opposition financed by fossil-fuel interests.
One problem companies such as SolarEdge (SEDG) faces is corrupt fossil-fuel companies that finance reactionary politician such as Donald J. Trump (R-Florida). Some of these companies and politicians appear to do anything to stop solar power, including lies about climate change.
Climate Change and global warming create SolarEdge’s greatest opportunities because they provide powerful incentives to adopt green energy. However, climate change presents a danger because it is politicizing energy in the United States. Some conservatives seem honor bound to lie about Climate Change.
Does Fusion threaten SolarEdge?
A more theoretical but potentially greater menace to solar power is nuclear fusion or hot fusion. There have been several notable developments in fusion in recent months.
Commonwealth Fusion Systems (CFS) claims to have a design for a fusion reactor that could generate enough electricity to power a small city. CFS claims to have a design for a viable compact fusion reactor. However, CFS has not tested its reactor yet. Yet CFS claims to have raised $200 million in private investment to finance its fusion work.
The United Kingdom Atomic Energy Agency is testing a potential solution to one of fusion’s greatest drawbacks. Theoretically, a fusion reactor could generate enormous amounts of heat. That heat could be too great to contain with existing devices.
However, British engineers could have a solution to that problem at the Mega Amp Spherical Tokamak (MAST) reactor. Notably, Her Majesty’s Government has provided £220 million in funding for a Spherical Tokamak for Energy Production that could go into operation by 2040, Science Magazine reports.
Is Fusion a Pipe Dream or a Reality?
I think the recent developments show fusion could change from a pipedream to reality in a few years. Fusion could be a dangerous competitor to solar because it could generate enormous amounts of electricity with no pollution. Hence fusion could generate far more electricity than solar at a lower price.
Thus, fusion is something all energy investors need to watch. Solar power could be uncompetitive with fusion. Conversely, I think fusion is 10 years away at the earliest.
I think SolarEdge is an excellent company in a growing industry with an overpriced stock. Investors need to avoid SolarEdge (SEDG) until Mr. Market gives it a realistic price.
Originally published at https://marketmadhouse.com on November 5, 2020.