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Deutsche Bank Upgrades SMA Solar to 'Buy' on Stronger Q2 and Raised Outlook
Deutsche Bank upgraded SMA Solar Technology AG (ETR:S92G) to "Buy" from "Hold" on Monday, significantly raising its price target on the German solar inverter manufacturer to €75 from €44. The upgrade follows the company's preliminary second-quarter results and improved earnings outlook, which the bank believes support further upside for the stock.
Stronger Q2 Driven by One-Offs
Last week, SMA Solar announced preliminary second-quarter results that surpassed analyst expectations. The company's performance included:
- Revenue: €346 million, a 3% decrease from the prior-year period.
- EBITDA: €65 million, a substantial improvement from a €16 million loss a year earlier and well above the consensus estimate of €44 million.
- EBIT: €52 million, compared to a loss of €30 million in the same quarter last year and beating the €32 million consensus forecast.
According to Deutsche Bank's analysis, the reported earnings were significantly boosted by two one-time events. These include the earlier-than-expected reimbursement of U.S. tariffs and a €22 million inventory write-back after the company sold previously impaired stock on the secondary market.
Analyst's Take
AdExcluding these one-off items, Deutsche Bank estimated SMA Solar's underlying second-quarter EBITDA at €41 million and EBIT at €28 million. While these adjusted figures were modestly below consensus expectations, the bank noted they still represent a clear operational improvement compared to the previous year.
The brokerage stated that the combination of stronger underlying business performance and the company's raised full-year guidance justifies a more constructive view. This prompted the upgrade to "Buy" and the more than 70% increase in its price target, despite a recent rally in the shares.
Market Reaction
In Frankfurt trading on Monday, shares of SMA Solar slipped 0.7% to €61.10. The stock's performance lagged the broader German DAX index, which was down approximately 0.2% during the session.
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