SolarEdge Technologies missed revenue estimates for its latest completed quarter, and shares tumbled by about 10% as a result. It just hasn’t been a good 24 hours for solar stocks as SunPower tanked after its management slashed guidance for the next 18 months. The big concern in the solar market right now is the residential segment, but it’s one that some analysts expect to pass.

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SolarEdge Technologies still improving margins

Deutsche Bank analyst Vishal Shah reduced his price target for SolarEdge Technologies from $27 to $22 per share but maintained his Buy rating on the stock. He highlighted the company’s continued improvements in margins despite the slower-than-expected growth. He also explained why the Tesla – SolarCity tie-up may not be as much of a concern as some expect it to be.

SolarEdge Technologies posted revenues of $124.8 million and earnings of 44 cents per share, compared to the consensus estimates of $129 million and 39 cents per share. The company’s gross margin came in at 31.4%, beating Shah’s estimate of 30% and management’s outlook for 39% to 31% as they were able to reduce costs by more than they had previously expected to be able to do. For the September quarter, they look for revenue to be between $130 million and $139 million and a gross margin of 30% to 32%.

Good points for SolarEdge

Shah pointed out that SolarEdge Technologies isn’t seeing any big changes in pricing expectations of a decline of 7.5% to 10% decline. Other than Enphase Energy, the company doesn’t really have any major competition, either from competitors in China or from traditional inverter makers. SolarEdge is also enjoying strong momentum in Europe and Australia as international markets made up about 40% of revenues in the June quarter.

Further, customer concentration is falling as the top ten customers made up about 45% of total revenues, compared to 55% to 65% in the previous quarters. The company is also picking up momentum in the area of smaller distribution and expects to improve margins to between 32% and 37% by the fourth quarter of next year.

Shah notes that revenue growth could remain rather low until SolarEdge picks up momentum with its bigger customers, which he expects in the second quarter of 2017. However, he sees the solar firm’s stock has trading at a large discount compared to other growth stocks.

He doesn’t believe Tesla will be much of a competitor for SolarEdge Technologies in the area of energy storage, which is still a pretty small percentage of its total revenues. He doesn’t expect storage to become a major driver of growth next year either. The company’s management even said that Tesla’s development of an integrated inverter and battery product shouldn’t have a major impact on their business because Tesla will still need to use their optimizers. Further, SolarCity is now only a small percentage of its business, so losing it shouldn’t have a serious impact on its earnings.

Residential concerns continue for SolarEdge

Goldman Sachs analysts trimmed their price target for SolarEdge, highlighting the ongoing slowdown in residential solar growth. They expect these headwinds to persist in the near term as the company continues to lose share at some of its top customers. Goldman’s target moves from $22 to $19 per share.

JPMorgan analysts also slashed their price target for SolarEdge (just as they did for SunPower as well), moving from $31 to $26 per share. SolarEdge shares are trading at $16.83 as of this writing.