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, targeting SolarEdge (NASDAQ:SEDG), Maxeon Solar Technologies Ltd (NASDAQ:MAXN), and TPI Composites (NASDAQ:TPIC), are paired with sharply reduced price targets.
For SolarEdge, the price target was slashed to $9 from $23, marking a potential downside of 30%.
Morgan Stanley analysts highlight prolonged weakness in European demand due to falling power prices and policy changes, coupled with aggressive competition from low-cost Chinese manufacturers.
They believe these factors “pose a risk to SEDG's path back to strong run-rate margins and sustainable cash generation.”
Moreover, the company faces a $346 million debt maturity in September 2025, “which if not executed near-perfectly, could result in a significant liquidity crunch,” analysts added.
For Maxeon, Morgan Stanley sets a price target of $4. The downgrade comes amid concerns over high competition in Europe, customer attrition in the US, and uncertainties surrounding Department of Energy (DOE) funding for its US manufacturing facility.
According to analysts, the solar panel manufacturer faces substantial pricing pressures, particularly in Europe, where prices have dropped to $0.10 per watt—significantly below Maxeon’s production cost.
Moreover, the loss of SunPower (OTC:SPWRQ), a key 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 strength in its high-margin IBC offering,” analysts led by Andrew S. Percoco said.
“Barring a substantial improvement in IBC demand, we see a challenging path back to profitability,” they added.
Lastly, Morgan Stanley downgraded TPI Composites and cut its price target from $4 to $2 driven by increased competition from Chinese blade manufacturers and a slow recovery in the US wind market.
The Wall Street firm notes that competitive pricing and operational challenges in Europe, alongside muted US onshore wind growth, have eroded TPIC's profitability.
“Uncertainty surrounding the pace of rebound in the U.S. wind market, driven by financing challenges, continues to weigh on near-term growth prospects.”
The downgrades align with Morgan Stanley's broader shift in clean tech sector sentiment, which has moved from Attractive to In-Line.
Analysts point to concerns around the Inflation Reduction Act, tariffs, and interest rates as key risks, alongside an already challenging operating environment marked by financing hurdles and competition.