Israeli renewable energy company SolarEdge is set to make cuts as part of an extensive efficiency plan that includes laying off 900 employees, 550 of whom work in Israel. The company currently employs around 5,500 workers, making the move a reduction of about 16% of its workforce.
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The move is being made against the backdrop of a sharp decline in SolarEdge's revenues. In its financial report for the third quarter of the year, the company – which manufactures solar energy converters – reported that revenues for the fourth quarter of 2023 are expected to total approximately $325 million, a figure 55% lower than the revenues of the year’s third quarter.
The unexpected announcement surprised analysts, as the projected amount was significantly lower, with a 55% gap from the market's average predictions. The revenues presented by the company in the third quarter of 2023, $725 million, were also 27% lower than their second-quarter revenues, which stood at $991 million.
SolarEdge manufactures systems for managing solar-powered power plants. The company attributes the decline in revenues to deferred orders and cancellations from customers and distributors in Europe, alongside an increase in stock. Additionally, SolarEdge is grappling with a challenging macro environment that is affecting renewable energy companies in general.
The high interest rates have made project financing very expensive, and the renewable energy sector is highly sensitive to such cost increases. Additionally, the rise in commodity and raw material prices must also be taken into account.
All these factors have led to a decrease in demand for the installation of solar-based systems, especially in the private market (residential installations). Changes in tax incentives in the United States and Europe have also contributed to the decline in demand.
The company’s lower revenues have resulted in a sharp drop in SolarEdge's market value. Last week, despite the positive market rate in the United States, the energy company's stock fell to its lowest point in four and a half years, since September 2019.
The company's market value is currently measured at $3.9 billion, after reaching a peak of $20 billion in the middle of 2023, making it the largest Israeli company on Wall Street.
In 2021, SolarEdge made history by becoming the first Israeli company to be included in the S&P 500 index, which comprises the 500 largest companies traded on the New York Stock Exchange. However, due to the decline in its value, SolarEdge was subsequently removed from the index.
In addition, last week, Barclays Corporate and Investment Bank lowered SolarEdge's target price to $50 per share, a 29% decrease from the stock's price last Friday ($69.1 per share). Therefore, market expectations suggest a challenging period ahead for the company in 2024.