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In a move that has sparked optimism among investors, SolarEdge Technologies (SEDG 8.55%) has announced the closure of its energy storage division, leading to a nearly 9% surge in the company’s stock price on Thursday. This decision stands in stark contrast to the overall trend observed in the market, with the S&P 500 index dropping by 0.4% on the same day.
Ending Operations
The announcement, made prior to the market opening, revealed that SolarEdge will cease operations in its energy storage segment, affecting approximately 500 employees, primarily based in South Korea. The company anticipates that this strategic move could yield savings of about $7.5 million each quarter. In addition, SolarEdge plans to divest related assets, including its manufacturing facilities.
Ronen Faier, the interim CEO, emphasized the significance of this decision in a press release, stating that it aligns with the company’s ongoing efforts towards establishing financial stability through cost reductions, achieving positive cash flow and profitability, and concentrating on their primary business areas encompassing solar energy, PV-attached storage, and energy management.
This strategic shift follows disappointing results for the third quarter, where SolarEdge’s revenue fell significantly, nearing the lower end of management’s expectations, with a staggering 64% decline compared to the previous year. Furthermore, the company’s GAAP net income experienced a dramatic downturn, reporting a loss exceeding $1.2 billion, contrasting sharply with the loss of $62 million recorded in the same quarter of the previous year.
Refocusing Strategy
As SolarEdge pivots back to its main area of expertise in solar energy technology, the company faces a challenging landscape marked by intense competition. Despite this renewed focus, there are concerns about the overall solar sector’s profitability, and investors are advised to approach this stock—and the industry as a whole—with caution.
Source
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