Shares of SolarEdge Technologies (NASDAQ: SEDG) found a sunny corner of Wall Street on Friday. Boosted by a mildly bullish report from analyst firm Jefferies, the stock peaked at a 16.7% gain just before 11 a.m. ET. As of 11:55 a.m. ET, it had cooled down to a 13% increase.
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Jefferies analyst Julien Dumoulin-Smith lifted SolarEdge’s recommendation from “underperform” to “hold.” The target price rose from $30 to $49 per share. The upgrade immediately lifted SolarEdge’s price above Jefferies’ target, with the stock currently trading at $51.59 per share.
Dumoulin-Smith cited the Iranian conflict and the resulting energy price boom as a potential catalyst for solar power specialists. When fossil fuels are expensive, it makes sense to pursue alternative energy sources, after all.
Two months ago, Jefferies lowered its SolarEdge rating to “underperform” due to unclear market prospects and the simultaneous introduction of new solar power management products from both SolarEdge and chief rival Enphase Energy (NASDAQ: ENPH). Those concerns are taking a backseat to the unexpected war in Iran and the blockade of the crucial Strait of Hormuz oil-shipping channel.
Even so, Jefferies isn’t exactly pounding the table about SolarEdge. The stock price has tripled over the last 52 weeks, but is still down by a staggering 81% in five years. Sales have been lumpy in recent quarters, and the company is deeply unprofitable. That’s why a significant growth catalyst only earns the stock a modest “hold” rating with price targets in the neighborhood of current prices.
The sudden boom should bring other benefits to the table, though. For example, SolarEdge has seen unsold inventory clogging up its warehouses and balance sheet due to slow orders from European customers. But the oil-price crisis has sparked new life in that particular market, which could help SolarEdge monetize some of its older inventory.
In February’s earnings call, CEO Shuki Nir said that SolarEdge must “focus on what we can control,” like innovation in power inverter technology and executing on opportunities. Soaring oil prices are far outside that range of controllable factors, but executing on this unexpected opportunity will be an important test.