SolarEdge to embark on massive layoffs, cutting 900 jobs amid sharp drop in revenue
SolarEdge to embark on massive layoffs, cutting 900 jobs amid sharp drop in revenue
The renewable energy company, which has seen its valuation fall by 80%, is expecting its revenues in the fourth quarter of 2023 to be 55% lower than the third quarter, which were themselves 27% less than the second quarter
SolarEdge is embarking on an extensive cutback program that includes laying off 900 employees, 550 of which are based in Israel. The company employs about 5,500 people, meaning it will be cutting around 16% of its total workforce.
This decision comes amid a sharp decline in SolarEdge's revenues. The renewable energy company previously said that it expects its revenues in the fourth quarter of 2023 to amount to approximately $325 million— 55% lower than the revenues in the third quarter.
The announcement surprised analysts, who were predicting a drop in revenue, but not to such an extent. The revenues presented in the third quarter, $725 million, were also 27% lower than the revenues of the second quarter, which were $991 million.
SolarEdge’s fall from grace has been especially painful, with the company being part of the S&P 500 up until two months ago. The company, which produces systems for managing solar installations, attributes the decrease in revenue to the postponement of orders and cancellations from customers and distributors in Europe, along with an increase in inventory. Additionally, SolarEdge faces a difficult macro environment which is challenging for renewable energy companies in general.
The high interest rate made financing projects very expensive, and the renewable energy industry is highly sensitive to such an increase in price. This must be added to the increase in the prices of goods and raw materials. All of these factors led to a decrease in demand for installing systems, especially in the private market. A change in tax incentives in the U.S. and Europe also contributed to the damage to demand.
The decline in revenues resulted in a sharp drop in the value of SolarEdge. Last Friday, despite the positive trend in the U.S. markets, the energy company's stock fell and reached a four-and-a-half-year low since September 2019. The company's market value is currently estimated at $3.9 billion, a far cry from the record value of $20 billion which it reached in mid-2022, becoming the largest Israeli company on Wall Street.
Additionally, last week, the investment bank Barclays lowered the target price of SolarEdge shares to $50, a price 29% lower than the share price at the closing of trading on Friday ($69.1).
Nevertheless, investment behemoth BlackRock has decided to increase its stake in SolarEdge over recent months, with a report to the U.S. Securities & Exchange Commission (SEC) revealing that it held a 15.8% stake in SolarEdge at the end of 2023, up from 9% in its previous report in April 2023.
Zvi Lando, Chief Executive Officer of SolarEdge, said, “We have made a very difficult, but necessary decision to implement a workforce reduction and other cost-cutting measures in order to align our cost structure with the rapidly changing market dynamics. We are making every effort to treat our departing colleagues with respect and gratitude for their contributions and support them in their transition. We remain confident in the long-term growth of the solar energy market and our leading position in the smart energy space. These changes do not impact our strategic direction and priorities and we remain committed to continue to drive the renewable energy transformation, while providing best in class technology and support to our customers.”
