SolarEdge: Why Goldman Sachs Is Polishing Rocks at the Bottom of the River

SolarEdge is a company that once made headlines for its solar solutions but is now making headlines for… other reasons. Let’s just say if SolarEdge were a football team, their coach would be yelling “punt!” before the game even started. Yet, amid the carnage, Goldman Sachs came charging in with a shiny double upgrade, like a knight in golden armor waving a flag that reads: “We swear this stock isn’t dead!”

Now, as someone who’s seen Goldman make calls like this before, my skepticism kicks in. Typically, when Goldman gives a double upgrade to a company scraping the bottom of the valuation barrel, it’s because they already bought shares and want you to come clean up their mess. “We’ll get the first yacht; you get the lifeboat.” So what exactly is happening here, and is SolarEdge worth more than its current clearance-sale valuation? Let’s dig into the numbers—and the drama.

Balance Sheet Blues: A Billion-Dollar Question

First stop, the balance sheet. SolarEdge currently boasts about $303 million in cash and $674 million in marketable securities. Not bad, right? Hold your applause—there’s a twist. Their current liabilities clock in at a staggering $1 billion. That’s like being super excited to find $10 in your pocket, only to realize you owe $100 for dinner.

To make things worse, SolarEdge’s inventory is now at almost $1 billion as well. Inventory is great if people want to buy it, but when demand tanks harder than a kid belly-flopping at a pool party, you’re in trouble. And let’s be real: at this point, they’re not selling solar panels—they’re begging people to take them off their hands.

A billion in liabilities. A billion in unsold inventory. If there’s a silver lining, it’s probably made of tinfoil.

The $204 Million “Oopsie” Charge

But wait, there’s more. Somewhere in their recent filings sits a quiet little line item: a $204 million impairment charge. For those unfamiliar with “impairment,” it’s a fancy way of saying, “We screwed up, and our assets aren’t worth what we thought.” You can usually spot this sort of thing at companies that got a little too ambitious, spent like a Kardashian at a boutique, and are now stuck with assets they can’t offload.

So where did this impairment hit? In their Plant, Property, and Equipment line. That’s right—they dropped $200 million on things they now wish they hadn’t. It’s like buying a mansion, realizing it’s haunted, and paying someone to take it back. There’s also a chance they’re writing down old inventory they can’t sell, which doesn’t exactly scream “financial stability.”

But hey, it’s fine. Just slap on some deep discounts, whisper “next-gen products are coming,” and hope shareholders don’t notice the flames licking the edges of the quarterly report.

Revenues Are Tanking—Costs Are… Not?

Now for the pièce de résistance: revenues. Let’s talk about how they’ve absolutely tanked from $725 million to $260 million. For context, that’s not a “slowdown”—that’s a nosedive worthy of a pilot ejecting mid-air. Normally, when revenue collapses, you’d expect costs to follow suit, right? Well, SolarEdge says, “Nah, we’re special,” and somehow their cost of revenues went up.

So let’s recap:

Revenue collapsed.
Costs went up.
Margins are gasping for air at 0-3%.

It’s as if SolarEdge got tired of profitability and decided to try out a new hobby: burning cash. Meanwhile, their competitor, Enphase, is still out there flexing its muscles with 40%+ gross margins. You can almost hear Enphase whispering to SolarEdge, “Oh sweetie, what are you doing?”

The Earnings Call: Hope, Optimism, and Desperation

Desperate for answers, I tuned into their earnings call expecting clarity. What I got was a mix of hopeful buzzwords, forced optimism, and just enough reality to make investors sweat.

The big reveal? SolarEdge’s margins are temporarily toast because they’re trying to clear out existing inventory. “Just wait until our next-gen products roll out,” they said, brushing off the fact that Q4 margins are still projected at 0%.

Let’s pause here. Zero percent. That’s like running a lemonade stand and charging enough to cover the lemons—but not the cups, sugar, or the kid working the stand.

Management insists that once old inventory is gone, things will improve. Maybe. But to me, it sounds like they’re hawking their current products at a black Friday discount just to keep the lights on.

Goldman Sachs to the Rescue?

So why is Goldman Sachs so bullish? Maybe they see something I don’t, or maybe they’ve perfected the art of polishing rocks at the bottom of the river. Sure, SolarEdge’s stock is in the dumpster, but low prices alone don’t make for a good investment. Fundamentals matter, and right now, the fundamentals scream “We’re desperate!”

This isn’t Enphase. Enphase has weathered storms, generated cash flow, and kept margins intact. Even on a bad day, Enphase looks like it’s sipping cocktails in first class while SolarEdge is stuck in the middle seat of a budget airline flight—next to a screaming baby.

The Bottom Line: SolarEdge vs. Enphase

Here’s the real kicker: when the solar market wobbles, Enphase still prints money. Their fundamentals are strong, their margins are beefy, and their business model doesn’t involve giving away inventory for free. Meanwhile, SolarEdge looks like it’s using a fire sale as its primary strategy and praying for a turnaround.

Goldman Sachs’ optimism feels misplaced—like cheering for someone trying to fix a leaky boat with duct tape. Sure, SolarEdge might recover, but investors would be wise to pack a sandwich and a book because it’s going to be a long wait.

Final Thoughts

At this point, I can’t help but feel like SolarEdge is trying to sell me a story more than a turnaround. Revenues are down, costs are up, and margins are flatter than a pancake. The impairment charge? A cherry on top of this financial trainwreck.

So if you’re an investor, think carefully. SolarEdge might bounce back, but for now, it’s circling the drain while Enphase continues to lap it like an overachieving sibling. As for Goldman Sachs, I’m sure they’ll enjoy their yacht while the rest of us try to make sense of this mess.

Moral of the story: Sometimes “scraping the bottom” just means you’re at the bottom.