Global Decarbonization Will Expand Inverter And Storage Demand

Key Takeaways

• Accelerated cost savings and strong product leadership are set to lift recurring margins and profits beyond market expectations.
  
• Proactive global expansion and diversification in projects and regions will reduce volatility and drive sustained long-term revenue growth.
  
• Heavy exposure to policy, regional, and competitive risks threatens SMA Solar's growth, margins, and diversification as market shifts and pricing pressures intensify.

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 sees the cost savings from restructuring as slow to materialize, but evidence from management indicates these savings will arrive ahead of schedule and above targets, boosting EBITDA and net margins more quickly than currently expected.
  
• While analysts broadly believe the Large Scale segment's growth may be at risk due to U.S. trade policy uncertainty, SMA Solar's strongly diversified project pipeline and proactive localization in the U.S. position it to accelerate revenue growth and margin expansion once policy clarity returns.
  
• Driven by expanding global decarbonization mandates and persistent energy security concerns, SMA Solar stands to benefit from tidal long-term demand growth for inverters, energy storage, and grid-stabilizing solutions, ensuring sustained revenue and earnings growth.
  
• SMA's leadership in advanced grid integration, energy management, and storage-recently evidenced by multi-functional grid stability projects in Europe-enables premium product offerings with higher associated service and software revenues, lifting blended margins and recurring earnings.
  
• Ongoing expansion into high-growth international regions, particularly the Americas and Asia-Pacific, coupled with strong relationships with global EPCs and utilities, will further diversify revenues, reduce volatility, and provide a robust foundation for long-term topline growth.

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 4.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -9.4% today to 7.7% in 3 years time.
• The bullish analysts expect earnings to reach €131.8 million (and earnings per share of €3.78) by about July 2028, up from €-140.6 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 7.3x on those 2028 earnings, up from -4.9x today. This future PE is lower than the current PE for the GB Semiconductor industry at 17.5x.
• 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 8.9%, as per the Simply Wall St company report.

SMA Solar Technology Future Earnings Per Share Growth

Risks

• SMA Solar remains highly exposed to macroeconomic and policy volatility, including ongoing global trade tensions and particularly the escalating US tariff environment on modules and batteries, which threatens project viability and could materially reduce revenue growth in its key Large Scale segment.
  
• The company's Home and Commercial & Industrial (C&I) segments have experienced severe and sustained revenue declines-Home segment revenue dropped by 65 percent year-on-year in the latest quarter-largely due to overcapacity, high stock levels among customers, and stagnant demand, casting doubt on long-term revenue diversification and stability.
  
• There is intensifying pricing pressure, especially from lower-cost Asian (notably Chinese) inverter suppliers, leading SMA Solar to enact price reductions in line with its budget; this trend heightens the risk of margin erosion and ongoing profitability challenges.
  
• SMA Solar's heavy weighting towards EMEA and Germany, even as these markets face policy changes, market saturation, and an accelerating shift from PV to storage, exposes the business to regional shocks that could undermine overall earnings consistency.
  
• The broader solar inverter industry faces fundamental secular risks, including the rise of fully integrated solar modules and alternative power conversion technologies, and if SMA Solar's innovation or product evolution lags in smart energy management or integrated solutions, its future addressable market and potential revenue streams may shrink significantly.

Valuation

• The assumed bullish price target for SMA Solar Technology is €22.0, 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 €22.0, and the most bearish reporting a price target of just €15.0.
• 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 €131.8 million, and it would be trading on a PE ratio of 7.3x, assuming you use a discount rate of 8.9%.
• Given the current share price of €19.7, the bullish analyst price target of €22.0 is 10.5% higher.
• 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.