Earnings were the topic for solar energy stocks last week -- and there wasn't a lot to like.
There wasn't much good news for the solar industry this week, as earnings season brought bad report after bad report. Residential solar companies are suffering most because of policy changes in Europe and California, just as higher interest rates were making it harder to economically build solar projects.
The three most impacted companies this week were Sunrun (RUN -6.89%) which fell 27% for the week; SolarEdge Technologies (SEDG -3.69%), dropping 21.4%; and Sunnova Energy (NOVA -13.19%), which was off 32.7%, according to data provided by S&P Global Market Intelligence.
Installers give more bad news
Last week, SunPower reported results, and management expected results to improve later in 2024, but the start of the year would be rough. On top of that, SunPower raised money at very diluted terms, which showed the tough financing environment for the industry.
Sunrun was the biggest report of the week, and revenue fell 15% in the fourth quarter of 2024 to $516.6 million. The company lost $350.1 million, or $1.60 per share. Even on a non-GAAP (generally accepted accounting principles) basis, the loss was $1.33 per share, well below the $0.13 loss that analysts expected.
Sunnova reported revenue of just $194.2 million and a loss of $1.53 per share, well below the $223.4 million in revenue and $0.18 loss that analysts expected. The company also announced a $100 million at-the-market stock offering program the company could tap if needed.
Management said they don't need to raise capital by selling equity yet, but this is a great option to have for the future.
SolarEdge's fortunes get worse
The worst news came from SolarEdge. It's downstream of installers as a hardware supplier, and that means it gets hurt when demand falls and when inventory is cut at installers.
Revenue for the quarter dropped to $316 million from $890.7 million a year ago, but management expects revenue to drop to $175 million to $215 million in the first quarter of 2024. And the loss of $162.4 million last quarter will likely be worse, given guidance for break-even gross margins and operating costs of $122 million to $130 million.
SolarEdge's bigger problem is that its closest competitor, Enphase Energy, looks like it's gaining market share and maintaining margins in excess of 40%. It's possible SolarEdge is in decline in an overall declining solar industry.
Is the bottom in sight?
What investors are trying to figure out is whether the bottom is in sight for the industry. Installations are expected to be weak again in the first half of 2024, with activity picking up in the second half of the year.
What's not clear is how much money these companies will make when the market recovers. Interest rates are still up from a year ago, and policy changes in California specifically make it harder to build a solar installation economically.
For the time being, investors are assuming the worst for the industry. And that stance may be right until we see evidence of a recovery taking hold.
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