SolarEdge Technologies (NASDAQ:SEDG) shares plunged more than 6% pre-market today after Citi analysts downgraded the stock from Neutral to Sell, lowering the price target to $9 from $12. The decision reflects growing concerns about the company’s financial flexibility, earnings outlook, and increasing competition in the solar sector.

The broader renewable energy market faced significant challenges last year, including fluctuating commodity prices, shifting regulations, and political uncertainty. These headwinds were compounded by frequent guidance cuts, eroding investor confidence and amplifying volatility.

While utility-scale companies are better positioned to navigate these pressures, supported by growing demand for clean energy in data centers and AI, as well as favorable interconnection economics, the residential solar segment remains more vulnerable. This vulnerability stems from a heavy reliance on government incentives and relatively weaker balance sheets.

According to the analysts, SolarEdge faces particular difficulties, with tight liquidity and a challenging path to achieving earnings growth. The company’s competitive position has also come under pressure, exacerbating its struggles in an already tough environment.