Summary
BMO Capital increased its price target for SolarEdge Technologies (NASDAQ:SEDG) to $26 from $25, but left its rating at Underperform following the company’s fourth-quarter 2025 results and subsequent guidance. SolarEdge gave first-quarter revenue guidance slightly above both BMO’s estimate and consensus. Management highlighted improving gross margins, aided by fixed cost absorption and production tax credits tied to a manufacturing shift to the U.S., though BMO warns that profitability remains challenged when stripping out those credits.
Key points
- Price target raised to $26 from $25 by BMO Capital, rating remains Underperform.
- First-quarter revenue guided to $290 million - $320 million, modestly above BMO’s $293 million estimate and consensus of $296 million.
- Gross margins improving with Q1 guidance of 20% - 24%; last twelve months gross profit margin was 16.6% per InvestingPro data.
Risks and uncertainties
- Profitability reliance on production tax credits tied to U.S. manufacturing - if those credits change or decline, EBITDA prospects could worsen. (Impacts: solar equipment manufacturers, renewable energy sector)
- Revenue pressure persists despite recent improvements - sustained top-line weakness would constrain margin recovery and cash generation. (Impacts: solar equipment suppliers, renewable project developers)
Full analysis
BMO’s decision to lift its price target for SolarEdge to $26 from $25 came after what it described as a fourth-quarter 2025 earnings call that was largely in line with expectations. The bank did not alter its rating, retaining an Underperform view on SEDG despite upward pressure on the target.
Management’s guidance for the first quarter set revenue between $290 million and $320 million. That range sits modestly above BMO’s $293 million forecast and slightly above consensus of $296 million, according to the same data cited by the analyst note. The guidance was issued against a backdrop of $1.18 billion in trailing twelve-month revenue for SolarEdge, a figure that represents 31.4% year-over-year growth.
Gross margins are a central focus. BMO and company commentary indicate margins are moving back toward the roughly 30% levels seen prior to the downturn. For the first quarter, SolarEdge guided to gross margins of 20% to 24%. The improvement has been attributed to better absorption of fixed costs and a rise in production tax credits as the company shifted manufacturing activity to the U.S. Nevertheless, InvestingPro data shows SolarEdge’s gross profit margin for the last twelve months was 16.6%, underscoring ongoing profit-pressure for the business.
On forward modeling, BMO modestly raised its top-line forecasts for 2026 and beyond. However, and importantly, the firm maintains that excluding production tax credits SolarEdge is expected to generate negative EBITDA levels even beyond 2026. The analyst summed up the stance with a direct line: "SEDG Back on Offense, but We Still Think the Playing Field Remains Tough." That phrasing encapsulates the view that operational improvements are evident but that structural profitability constraints persist.
Other broker activity has been more bullish in tone. Following the fourth-quarter report, TD Cowen raised its price target on SolarEdge from $38 to $43 and kept a Buy rating. TD Cowen highlighted the company’s positive free cash flow and management’s objective of achieving EBIT profitability later in the year. The firm’s action, together with the quarter’s margin improvements, has increased investor interest in the company as it navigates revenue challenges.
InvestingPro data referenced in the analyst notes also shows SolarEdge shares have risen nearly 79% over the past year, and that current analyst price targets span a wide $17 to $43 range. Those data points reflect divergent views on the durability of the company’s recovery and its path to sustained profitability.