Morgan Stanley Downgrades Solar Energy Stocks

Investing.com – Morgan Stanley (NYSE:MS) has revised its stance on the solar energy space, downgrading three stocks from Equal Weight to Underweight.

The downgrades target SolarEdge (NASDAQ:SEDG), Maxeon Solar Technologies Ltd (NASDAQ:MAXN), and TPI Composites (NASDAQ:TPIC), coupled with sharply reduced price targets.

SolarEdge

For SolarEdge, the price target was slashed to $9 from $23, indicating a potential downside of 30%.

Morgan Stanley analysts noted prolonged weakness in European demand due to falling power prices and policy changes, alongside aggressive competition from low-cost Chinese manufacturers. They warned that these factors “pose a risk to SEDG's path back to strong run-rate margins and sustainable cash generation.” Additionally, SolarEdge faces a $346 million debt maturity in September 2025, which could lead to significant liquidity issues if not managed perfectly.

Maxeon Solar

For Maxeon, Morgan Stanley established a price target of $4. This downgrade is influenced by high competition in Europe, customer losses in the United States, and uncertainties related to Department of Energy (DOE) funding for its US manufacturing facility.

Analysts indicated that the solar panel manufacturer is under considerable pricing pressure, especially in Europe, where prices have plunged to $0.10 per watt, well below Maxeon’s production costs. The loss of SunPower (OTC:SPWRQ), a critical US customer, poses long-term profitability challenges.

“We expect sales of higher-margin IBC panels into the US market to remain at compressed levels. Recall that MAXN's ability to reach profitability in 2023 was due to the strength in its high-margin IBC offering,” said analysts led by Andrew S. Percoco. “Barring substantial improvement in IBC demand, we foresee a challenging path back to profitability.”

TPI Composites

Morgan Stanley also downgraded TPI Composites, lowering its price target from $4 to $2, due to increased competition from Chinese blade manufacturers and a sluggish recovery in the US wind market.

The Wall Street firm noted that competitive pricing and operational challenges in Europe, along with muted US onshore wind growth, have adversely affected TPIC's profitability. “Uncertainty surrounding the pace of recovery in the U.S. wind market, driven by financing challenges, continues to weigh on near-term growth prospects.”

Conclusion

These downgrades reflect Morgan Stanley's broader shift in clean tech sector sentiment, moving from Attractive to In-Line. Analysts highlighted concerns regarding the Inflation Reduction Act, tariffs, and interest rates as essential risks in a challenging operational environment marked by financing hurdles and competition.