SolarEdge Technologies, a renewable energy company facing an 80% valuation drop, plans to cut around 16% of its global workforce to trim operating costs.
Substantial Cutback Initiative in SolarEdge
SolarEdge is implementing a substantial cutback initiative, which involves laying off 900 employees, with 550 based in Israel, equating to approximately 16% of the company's workforce, currently around 5,500 people.
The decision comes amid a sharp decline in SolarEdge's revenues, expected to amount to approximately $325 million in the fourth quarter of 2023, which is 55% lower than the revenues in the third quarter. The reduction comes after SolarEdge Technologies stopped manufacturing in Mexico, reduced manufacturing capacity in China, and ended light commercial vehicle e-mobility operations.
Analysts were surprised by the announcement, expecting only a revenue decline, but not to such extent of reductions. The third-quarter revenues of $725 million were also 27% less than the second-quarter revenues, which stood at $991 million.
SolarEdge's Notable Decline in Revenue
SolarEdge was part of the S&P 500 until two months ago, making its decline notable in the industry. The challenging macro environment for renewable energy companies contributes to SolarEdge's difficulties, delays in orders, cancellations from customers and distributors in Europe, and increased inventory. Higher interest rates and a metering reform in California, the country's largest solar market, have also reduced solar demand in the United States.
Revenue Drivers
The high interest rate raised project financing costs, impacting the cost-sensitive renewable energy industry. Coupled with rising prices for goods and raw materials, these factors reduced demand for system installations, particularly in the private sector. Changes in tax incentives in the U.S. and Europe further added to the decline in demand.
Currently valued at $3.9 billion, the decrease in revenues caused a significant fall in SolarEdge's value, where the stock dropped to a four-and-a-half-year low, dating back to September 2019, marking a substantial decrease from the record value of $20 billion in mid-2022 when it became the most prominent Israeli company on Wall Street.
BlackRock's Ownership in SolarEdge
Investment giant BlackRock has boosted its ownership in SolarEdge despite recent challenges, growing its stake by 15.8%, compared to 9% in April 2023, according to a U.S. Securities & Exchange Commission (SEC) report.
Market Dynamics Long-Term Alignment
The Chief Executive Officer of SolarEdge, Zvi Lando, stated that the company has undergone workforce reduction and cost-cutting measures to align with the quickly changing market dynamics, mentioning efforts to support departing colleagues in their transition. Lando expressed confidence in the long-term growth of the solar energy market and SolarEdge's leading position in intelligent energy. He clarified that these changes don't affect the company's strategic direction and priorities, reaffirming that "these changes do not impact our strategic direction and priorities, and we remain committed to continuing to drive the renewable energy transformation while providing best-in-class technology and support to our customers."
