The space-tracking Invesco Solar ETF slipped 7%, taking its one-month decline to 15%.
SolarEdge was the biggest drag against the fund, down 15%. The company declared profits after the bell Monday night. While the company’s results have exceeded analysts’ expectations for revenue and earnings, SolarEdge has warned of margin erosion in the future through higher shipping costs.
“Sea freight prices have risen by over 100% over the past few months and our pre-negotiated prices have gradually expired and exposed us to higher freight costs around the world,” said Zvi Lando, CEO of the company, when calling for results.
The company noted, however, that it has enough supply to meet demand in the second half of the year. This contrasts with competitor Enphase Energy, which said last week that its second-quarter deliveries would be constrained by the global chip shortage.
Semiconductors are key components for both battery storage and solar inverters. The shortage has also hit the auto industry, among others, with companies such as GM and Ford cutting production at several factories.
SolarEdge’s weakness spread to the rest of the industry on Tuesday, as investors fear companies may not be able to keep pace with record demand.
Sunnova reported higher than estimated profits on April 28, and the company also said it had stockpiled parts in anticipation of shortage fears. Still, stocks have fallen more than 20% over the past week.
SunPower and Sunrun are expected to release their results on Wednesday.
Still, some Wall Street analysts remain positive about the sector, noting that despite short-term headwinds, the long-term outlook remains strong.
“We are encouraged by demand trends and believe long-term investors should buy weakness in stocks ahead of expected improvements in supply constraints in the coming quarters,” JPMorgan noted.
The Invesco Solar fund gained 233% in 2020, largely outpacing the 16% gain of the S&P 500. For 2021, the fund is down 25% while the S&P 500 is up 10%.
– CNBC’s Michael Bloom contributed reporting.
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