Why SolarEdge Technologies Rallied Over 20% This Week

Key Points

• SolarEdge Technologies had a good week, as interest rates fell and the company ramped up international shipments from the U.S.

• The company also received a price target increase from a sell-side analyst.

• SolarEdge has begun a recovery, but shares remain a risky bet.

• 10 stocks we like better than SolarEdge Technologies ›

Shares of SolarEdge Technologies (NASDAQ: SEDG) rallied 22.4% this week, according to data from S&P Global Market Intelligence.

SolarEdge, like most solar stocks, has had a horrible few years, ever since interest rates shot up after the pandemic, followed by the Trump administration cutting incentives for U.S. residential solar purchases earlier this year.

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However, SolarEdge investors received some good news this week, as its U.S.-based manufacturing facilities began international shipments, and a sell-side analyst upgraded his price target.

SolarEdge edges back up

On Thursday this week, SolarEdge announced it had begun its first international shipments from its U.S.-based manufacturing facility, shipping U.S.-manufactured solar inverters to Australia. Additional shipments to other countries are scheduled to begin later this year.

It was another positive data point, after SolarEdge showed some improvement in its results last month, with revenue up strongly quarter over quarter and year over year after a nasty, years-long down cycle.

Then on Friday, solar analysts at J.P. Morgan raised their price target on SolarEdge shares from $23 to $27, although the analysts did maintain their "neutral" rating on the stock, which trades at $35.45 currently.

Finally, SolarEdge was also likely helped by the Federal Reserve's interest rate cut earlier this week -- the first rate cut in the past year. Residential solar is extremely sensitive to interest rates, given that solar is a big-ticket item that is usually financed.

Image source: Getty Images.

SolarEdge is in a tough industry, but could be in a turnaround

The solar industry is an extremely difficult industry to predict, and it doesn't have the best financial characteristics: It's very cyclical, and also dependent on certain government policies, depending on who's in office.

Therefore, investors in SolarEdge should be very careful with their allocations to the stock, should they want to play the continued recovery in the solar industry.

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Billy Duberstein and/or his clients has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.