SolarEdge Technologies (SEDG 27.39%) stock roared ahead 24.2% through 9:50 a.m. ET Wednesday despite the company reporting highly "mixed" earnings this morning.
Analysts forecast $189.2 million in fourth-quarter 2024 revenue for the solar equipment maker, but SolarEdge actually reported revenue of $196.2 million. That's the good news. The bad news is that Wall Street expected SolarEdge to lose $1.66 per share for the quarter -- and the worst news of all is that it actually lost $3.52 per share.
Mixed earnings indeed! So why do investors seem so universally in favor of SolarEdge stock after such a report?
That's an excellent question, because from where I sit, there's little good news to be found here. Revenue exceeded expectations, true, but was still down a staggering 38% year over year. Gross profit margin was negative. Operating margin was negative. On the bottom line, GAAP net losses were even worse than the $3.52-per-share adjusted loss. Calculated according to generally accepted accounting principles (GAAP), SolarEdge lost $5 a share.
For the full year, SolarEdge reported sales of $901.5 million, down 70% from 2023's $3 billion. Compared to 2023's $0.61-per-share profit, SolarEdge lost $31.64 per share for all of 2024.
So basically, it's bad news all around. And yet, there's a (small) glimmer of hope.
SolarEdge noted that despite the big GAAP loss, it generated positive free cash flow in Q4 -- $25.5 million. Free cash flow for the full year, however, was negative $421.5 million. So after a miserable year, things might be getting a little better, if SolarEdge can keep showing improvement on that metric.
In this regard, turning to guidance, management did forecast revenue of about $205 million, which is ahead of analyst forecasts, in Q1. Adjusted operating margin will remain negative however, implying another big loss for SolarEdge in the coming quarter.
Investors bidding up SolarEdge stock, I fear, are grasping at straws. This news isn't good, and this stock shouldn't be going up today.
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