Our target price of $9 is based on an average of 15x our 2027 adjusted EBITDA estimate, 22x our 2027 EPS estimates, and our DCF valuation. Our DCF valuation uses a WACC of ~9% and terminal growth rate of ~3%.

We rate SEDG High Risk due to its high volatility. Risks to our target price on SEDG are a 1) Solar installation growth could accelerate/decelerate, which would have positive/negative implications for SEDG's results, respectively; 2) Channel inventory normalization could occur quicker than expected, which would be positive for SEDG; 3) Government policies could become more/less supportive, which would be positive/negative for SEDG, respectively; and 4) Failure to develop new products that can compete with alternative options would hurt SEDG results; conversely, strong innovation would be a positive.