It’s good to do business with Elon Musk. That’s what SolarEdge Technologies Inc. is discovering, as demand from customers including Musk’s SolarCity Corp. helped the shares double since its March initial public offering.
The company, based in Herziliya Pituach, Israel, is poised to get another boost from Musk, by agreeing to provide components for residential energy-storage systems developed by Tesla Motors Inc.
SolarEdge’s inverters convert the direct current produced by solar panels into alternating current used on power grids. Increasing demand for clean energy has boosted the need for inverters, and strong interest in Tesla’s Powerwall batteries could open up a new market for the company. The storage systems offer customers a way to store electricity produced during the day and use it later.
“Grid operators are seeing that there is a consumption peak at night and production peak during the day, so there is a big inefficiency,” Ronen Faier, SolarEdge’s chief financial officer, said in a telephone interview last week. “More and more countries are saying to system owners, ‘we don’t want you to feed energy into the grid. We want you to use your own energy.’ That’s where batteries come in.” He declined to provide a value for the Tesla relationship.
“This started as a technical partnership, with the idea being to design a way to match their battery power to our inverter system,” Faier said. “If there is something that will make solar much more widespread, it’s storage.”
SolarEdge closed at $36.68 Wednesday in New York. They began trading in March at $18 a share.
Goldman Sachs Group Inc. analyst Brian Lee expects them to continue to increase, with a 12-month price target of $48.
“We see SolarEdge positioned to see volume upside moving through the second half of 2015 and into 2016 driven by an emerging energy storage opportunity via its partnership with Tesla,” Lee wrote in a research note last month. He estimates that for every 25,000 Powerwall units, SolarEdge will generate over $20 million of sales. The inverter maker reported revenue of $133 million in 2014, up 68 percent from the prior year.
James Evans, a Bloomberg Intelligence analyst, said the Tesla relationship will have long-term benefits for SolarEdge.
“Tesla is a big brand name,” said London-based Evans. “There’s obviously lots of potential even though at the moment this is still quite a small market.”