Shares of leading PV-inverter and power optimizer supplier SolarEdge Technologies (NASDAQ: SEDG) fell over 22% on Tuesday as the company reported disappointing third-quarter results. The poor results and guidance, combined with a rough period in the broader markets, have sent shares down 26% in just two weeks. The stock was down even more before its 10% rebound as of 2:40 pm on Thursday. Should investors panic and sell now, or take advantage of the reduced price? Image source: Getty Images. Disappointing results and guidance SolarEdge reported its second straight disappointing quarter. The poor results are mainly due to the company's struggling commercial business, which includes large-scale rooftop, ground, carport, and floating solutions that simply aren't performing well during this challenging business cycle. Adjusted Metrics Q3 2020 Q3 2019 Change Revenue $338.1 million $410.6 million (17.7%) Gross Margin 33.5% 35.1% (4.6%) Operating Expenses $63.2 million $54.8 million 15.3% Operating Income $50.0 million $89.2 million (43.9%) Net Income $65.9 million $63.6 million 3.6% Net Diluted Earnings Per Share $1.21 $1.21 0% Data source: SolarEdge Technologies Results are adjusted with the exception of gross margin and per-share data. Compared to the same period last year, revenue fell 17.7%, operating income fell 43.9%, and gross margin, which the company watches carefully, fell 4.6%. SolarEdge expected its commercial business to rebound somewhat quickly but reported that commercial installations are recovering slower than expected in key markets such as Europe, the U.S., and Australia. Lower sales have resulted in higher inventories in its commercial and residential business. In terms of units shipped, SolarEdge reported its lowest power optimizer numbers since the first quarter of 2019 and another low result for inverters. Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019 Power Optimizers Shipped (Millions) 3.27 3.52 5.06 4.45 4.59 3.73 3.03 Inverters Shipped (Thousands) 152.5 141.7 202.0 186.8 187.9 160.1 130.7 Data source: SolarEdge Technologies. Its guidance was also disappointing, calling for revenue between $345 million and $365 million and adjusted gross margin to be in a similar range -- 32% to 34%. If SolarEdge meets the midpoint of its guidance, revenue would be down 15.1% and gross margin would decline 250 basis points.Simply put, the company spent more money and made less money this quarter than the same period last year, which is a bad sign for a growth stock with an expensive valuation. Some good news Despite weak commercial results, the company generated record-high solar revenue in Europe, its largest market. Europe revenue comprised $165.6 million or 53% of total solar revenue in the quarter, driven by established markets in Germany and the Netherlands, as well as in smaller markets like France, Poland, and Switzerland. In North America, the company seems to be working through its inventory problem well. September, the last month of the quarter, had better results than the same period last year and 22% higher residential distributor sell-through and 40% higher commercial megawatts sold compared to August. The company notes that its residential distributor inventory levels are now at a healthy level -- a sign that SolarEdge is better adjusting its supply chain to the market. Although fourth-quarter guidance as a whole is disappointing, the company estimates that North American residential sales will grow by 50% compared to the third quarter. "We're expecting significant growth from Q3 to Q4 as inventory levels are down and installation rates are significantly up than they were earlier in the year, and coming close to those of the same periods of last year," SolarEdge CEO Zvi Lando said. For SolarEdge specifically, North America generally has a high gross margin, especially in the residential sector, so higher residential sales in the fourth quarter could help buoy the company's margins. A good long-term buy Although SolarEdge's results and guidance are disappointing, the stock's reduced price gives investors a lower entry point into a leading solar energy stock. SEDG data by YCharts Prior to a challenging 2020, SolarEdge had done an impressive job growing its top and bottom line, rewarding shareholders in the process. Although it misjudged its inventory levels, the company seems to be navigating the crisis well by growing sales in Europe and improving its position in North America. Despite soft guidance as a whole, North America-specific guidance seems to be a bright spot that should help the company maintain its high gross margin. SolarEdge had bad results, but the company is adjusting to the challenges of the pandemic better than it was in the second quarter. Long-term investors could give the company the benefit of the doubt on the basis that its residential segment is performing well and it is an industry leader in a strong sector. Find out why SolarEdge Technologies is one of the 10 best stocks to buy now Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* Tom and David just revealed their ten top stock picks for investors to buy right now. SolarEdge Technologies is on the list -- but there are nine others you may be overlooking. Click here to get access to the full list! *Stock Advisor returns as of October 20, 2020 Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool recommends SolarEdge Technologies. The Motley Fool has a disclosure policy.Source