SolarEdge (SEDG): Highly profitable

By Michael Cintolo, Chief Analyst, Cabot Growth Investor and Cabot Top Ten Trader
From Cabot Wealth Advisory 1/28/16 Sign up for Cabot Wealth Advisory—it’s free!

I’m busy working on my watch list, finding stocks that check most of the boxes on my stock-buying checklist (which has 24 specific characteristics I look for).

One name that continues to intrigue me is SolarEdge (SEDG), a little known (but rapidly growing) solar firm. I think it has a chance to be the Intel of the solar industry—it doesn’t make the solar panels or arrays, but has a next-generation inverter architecture that allows for greater efficiency, design flexibility and lower costs. It’s a win-win-win, and because of that, solar firms (especially rooftop providers) have beaten a path to SolarEdge’s door.

Beyond the company, the industry itself got a huge boost in December when the solar tax credit was extended in Congress for another couple of years—the stocks in the sector had already discounted a slowdown, but that good news sparked a huge wave of buying.

SolarEdge is highly profitable, and analysts see sales rising 20% in 2016 (to $581 million) while earnings are expected to leap 36% to $2.06 per share. I feel those figures will prove conservative, though, as the company has trashed estimates in recent quarters.

The stock came public around 20 last March, soared to 43 in June and then crashed to 15 in November, mostly because of the market and fears surrounding the solar tax credit. But the December extension caused SEDG to soar back to 30 on its heaviest volume ever (a big volume clue), and even during the market’s plunge this month, the stock has remained above its 50-day line.

You could nibble on it here with a stop in the 21 area, or just keep an eye on it—the longer SEDG can hold up, the better the chance it can morph into a powerful new leader after the market bottoms out.

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