Shares of SolarEdge rose on Wednesday after the residential solar equipment company was handed a bullish upgrade based on the premise that a federal action last month could unlock 41% upside.
SolarEdge stock advanced 6.8% to $31.91 on Wednesday and was on pace to snap a four-day losing streak. Investors were buying the stock even as shares have been in a 23% selloff this month.
Among other solar stocks, Enphase Energy dropped 0.3%, Sunrun fell 2.3%, and Nextpower gained 0.7%.
First Solar declined 0.5% to $205.70 even as Deutsche Bank Corinne Blanchard raised the firm's price target to $299 from $272 and maintained a Buy rating on the stock.
A reason for investor optimism for SolarEdge was that UBS analyst Jon Windham upgraded SolarEdge to Buy from Neutral with a price target of $42, up from $36. That new price target represented 41% upside from the closing price on Tuesday of $29.88.
The bullish view on SolarEdge was based on the Federal Communications Commission's late July announcement that it's banning new foreign-produced power inverters.
The ban applies to new models of foreign power inverters that connect to communication networks affecting more than 50% of the U.S. inverter market.
Power inverters are an integral component for solar energy systems. The inverter translates the direct current, or DC, electricity produced by solar panels into alternating current, or AC, electricity used in buildings.
The FCC move could be a boon for SolarEdge, according to Windham.
"SEDG is a key beneficiary of the U.S. Federal Communications Commission ban on new inverter model imports," the analyst wrote. "We anticipate the ban will create a supply constrained U.S. market driving both share gains and potential pricing power for SEDG."
Windham added that SolarEdge already has a prominent market position in commercial and industrial inverters and the firm anticipates the FCC ban "will drive higher volume and margins" for the company's inverter segment.
"Furthermore, the ban likely creates a market opportunity for SEDG's utility-scale inverter product which had seen limited market adoption prior to the ban," Windham wrote.
An added opportunity for SolarEdge is that the company had already shifted its manufacturing to the U.S. with commercial and industrial inverters made in Florida and residential inverters in Texas.
SolarEdge earlier this month posted better-than-expected earnings as revenue rose 20%, but issued third-quarter guidance that missed Wall Street forecasts.
Along with the FCC ban on foreign power inverters, the overhang on solar stocks from Section 232-the U.S. trade law provision that allows the government to investigate imports on grounds of national security-has also been removed.
The national security investigations and tariffs on imported raw materials-such as steel, aluminum, and polysilicon-had created severe pricing uncertainty, delayed projects, and complicated long-term procurement plans for many solar companies.
But the government has clarified the situation.
The Trump administration on Aug. 6 announced a general 15% tariff on imported silicon wagers, cells, and finished solar panels. The government also imposed minimum import prices on polysilicon and its derivatives effective Dec. 4, 2026.
Wall Street, however, is still cautious when it comes to SolarEdge. Of the 25 analysts polled by FactSet, SolarEdge has an average Hold rating with a price target of $35.44.
The bullish read on the FCC announcement has stopped the solar stock's bleeding for now, but the question remains if that 41% upside can be attained.