SolarEdge, Maxeon Solar slammed as Morgan Stanley cuts to Sell equivalent

SolarEdge Technologies (NASDAQ:SEDG) -16.1% and Maxeon Solar Technologies (NASDAQ:MAXN) -12.7% in Friday’s trading as Morgan Stanley downgraded the stocks to Underweight from Equal Weight, as uncertainty around the Inflation Reduction Act, tariffs and interest rates have added significant pressure to the clean energy sector.

Morgan Stanley believes clarity on the IRA is critical for clean tech valuations to recover, which could take time as it likely will be tied to negotiations around the 2017 tax code overhaul that expires at the end of 2025.

The bank’s analyst team led by Andrew Percoco and Devin McDermott foresee an elongated path back to profitability for SolarEdge (SEDG) due to deteriorating demand in Europe and strong pricing competition from low-cost Chinese manufacturers selling product into the market.

Morgan Stanley also sees risk around SolarEdge’s (SEDG) upcoming debt maturity in September 2025, which if not executed near-perfectly, could result in a significant liquidity crunch.

SolarEdge’s (SEDG) demand and underlying earnings outlook has continuously deteriorated, the bank says, adding the lack of demand visibility in its core markets creates a high level of risk for its cash flow outlook.

Also, Barclays reiterates its Underweight rating on SolarEdge (SEDG) while slashing its price target to $7 from $17, saying that while external funding might not be necessary over the next year, cash burn could resume by 2026 if weak demand persists or cost reductions fall short.

On Maxeon Solar (MAXN), Morgan Stanley notes the $197M in new funding from TZE that gave the Chinese firm a controlling ownership stake in the company, which could make it much harder to secure Department of Energy funding it had hoped would finance its first U.S. solar manufacturing facility, especially in light of a changing U.S. administration.

The bank maintains Overweight ratings for GE Vernova (GEV), First Solar (FSLR), Bloom Energy (BE) and Sunrun (RUN), while keeping Underweight ratings on Plug Power (PLUG) and TPI Composites (TPIC).

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