Electrification And Solar Plus Storage Will Redefine Energy Markets

Key Takeaways

• Ahead-of-schedule cost reductions and rapid US market localization are set to improve profitability and drive a quicker rebound in revenue.
  
• Leadership in advanced inverter, storage, and grid solutions positions SMA to benefit from electrification trends and achieve stable, diversified, high-margin growth.
  
• Eroding margins, demand stagnation, weak innovation, and heavy reliance on select regions make SMA Solar highly vulnerable to competitive, regulatory, and market risks.

Catalysts

Develops, produces, and sells PV and battery inverters, transformers, chokes, monitoring systems for PV systems, and charging solutions for electric vehicles in Germany and internationally.

• Analyst consensus expects cost savings from restructuring to gradually improve margins, but recent results show SMA already achieving cost reductions ahead of schedule, making it likely that EBIT and net margin improvements will be both deeper and realized sooner than the market anticipates.
  
• While views are cautious on Large Scale order intake and the US policy environment, SMA's strong pipeline of customer discussions and the accelerating localization of production for the US market signal a faster rebound in order intake and revenue than widely expected.
  
• SMA's rapid expansion of grid-stabilizing and energy storage solutions, together with leading silicon carbide inverter technology, positions the company to benefit disproportionately from global grid modernization and the surge in solar-plus-storage investments, lifting long-term revenue and supporting premium pricing.
  
• The shift toward electrification in transport, heating, and distributed energy networks is driving sustained demand for advanced inverters and integrated energy management-areas where SMA's broadening digital and service platforms will drive recurring high-margin revenues.
  
• SMA's accelerated growth in APAC markets and early leadership in high-growth regions, combined with resilient share in premium segments, will drive geographic diversification of revenue and earnings, reducing cyclicality and improving profit stability.

SMA Solar Technology Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on SMA Solar Technology compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming SMA Solar Technology's revenue will grow by 5.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -14.0% today to 7.3% in 3 years time.
• The bullish analysts expect earnings to reach €123.3 million (and earnings per share of €3.56) by about August 2028, up from €-204.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 7.4x on those 2028 earnings, up from -3.6x today. This future PE is lower than the current PE for the GB Semiconductor industry at 19.1x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.58%, as per the Simply Wall St company report.

SMA Solar Technology Future Earnings Per Share Growth

Risks

• Continued steep decline in the Home & Business Solutions division, with a 48% year-over-year drop in sales and persistent margin pressure, highlights the risk of secular demand stagnation in European residential and commercial solar, threatening group revenues and net profit margins if this business fails to recover or is forced into deeper restructuring.
  
• Intensified price competition, especially from aggressive Asian (mainly Chinese) competitors in core European markets, has eroded pricing power and forced SMA to remain a higher-priced premium supplier despite flat demand, which could further compress gross and operating margins over time.
  
• Weak order intake growth and backlog uncertainty in the Large Scale division, partly due to volatile global trade policy (notably US tariffs and the One Big Beautiful Bill Act), create visibility risks for 2026 revenue, especially if safe harbor effects do not materialize or market conditions worsen.
  
• Ongoing inventory write-downs, limited innovation in next-gen inverter solutions, and a lack of major recovery signals in European policy or subsidies collectively increase the risk of further one-off losses or required asset impairments, directly weighing down group earnings.
  
• High reliance on a narrow portfolio and key regions, combined with global trends toward hardware commoditization and industry vertical integration, expose SMA Solar to disproportionate swings in revenue and earnings should regulatory, demand, or cost structure trends turn adverse in its primary markets.

Valuation

• The assumed bullish price target for SMA Solar Technology is €21.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of SMA Solar Technology's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €21.0, and the most bearish reporting a price target of just €16.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €1.7 billion, earnings will come to €123.3 million, and it would be trading on a PE ratio of 7.4x, assuming you use a discount rate of 8.6%.
• Given the current share price of €21.02, the bullish analyst price target of €21.0 is 0.1% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.