The solar space has gone through a digestion phase with light at the end of the tunnel finally. Enphase Energy, Inc. (NASDAQ:ENPH) has seen initial signs of the residential solar business turning in key European countries, but the actual demand was far less than expected. My investment thesis remains Neutral on the stock after the recent rally has been met with tepid sell-through demand.
Turnaround Quarter
As with many sectors, the last few years have led to volatile financial outcomes. Whether due to Covid impacts or the Russian invasion of Ukraine, sales were generally a roller coaster in fast-moving sectors like solar.
Enphase Energy has spent the last few quarters with customers absorbing excess inventory, leading to reduced shipments into the channel. The company was under shipped demand by several hundred million dollars per quarter.
The home energy services company reported weak Q1 '24 results, with revenues missing analyst targets by $14 million on revenue of $263 million. The issue is that Enphase guided to revenues of at least $290 million in Q2, though the forecast was far below the consensus estimates of $346 million.
The key is that the maker of solar microinverters and batteries forecasts a return to growth led by a cut in channel inventory. Germany sell-through sales were up 28% and IQ battery inventories are now clean, leading to the forecast for a sales increase of $47 million at the midpoint.
Just as important, Enphase Energy has maintained a profitable business despite revenue slumping 64% in the last quarter. The company produced a $0.35 EPS in Q1 due to the company cutting x costs and still producing higher gross margins of 46.2% with a benefit of 5.2% from the IRA.
Even with lower operating expenses, Enphase Energy still saw operating expenses reach 31.4% of sales. This number should fall as sales rise again, making the home energy services company far more profitable going forward.
Enphase Energy only forecasts Q2 '24 expenses of ~$80 million.
Front-running Rebound
The biggest issue with the stock is the rebound has already been a front-runner of the business rebound. Enphase Energy already has a $17 billion market cap, and the company is hardly reporting $250 million in quarterly sales.
Based on the updated shipping numbers provided by the company, Enphase Energy maintains a quarterly business in just the $400 million range, versus previous forecasts of $450 to $500 million. The forecast is for Q2 under shipping sell-through demand by $90 million due primarily to microinverters and the weak California market.
The consensus estimates have normalized revenues jumping back up to $2.2 billion level in 2025. The sell-through demand is only running at a $1.6 billion rate in the 1H and the company forecasts the inventory issue will be resolved heading into the 2H, suggesting quarterly revenues should rebound to the $400+ million range.
Enphase Energy has expanded in Asia and Brazil, while the company is pushing further into IQ batteries for solar system storage. The market opportunity now is vastly higher than the prior cycle, but demand isn't bouncing back with the higher interest rates and huge demand pull forward in the prior years.
The market actually forecasts a rather massive jump in EPS. Enphase Energy only produced a $4.41 EPS in 2023 before the inventory issue in solar, but the market forecasts the company actually generate a $5+ EPS in 2025 on the way to a $6.25 EPS in 2026.
The stock already trades at 20x 2026 EPS targets and over 6x the revenue estimates of $2.7 billion. The big question is whether solar demand will actually soar back to previous levels, considering some demand drivers like COVID-19 in the U.S. and the lack of Russian energy in Europe drove elevated demand during the prior years.
Enphase Energy has made the base case for a return to growth, but the 2026 financial targets require sales to grow by nearly 70% above the current demand level. The stock is already expensive assuming the home energy services company can hit those aggressive snapback targets, and the risk is for Enphase to not reach those targets.
Takeaway
The key investor takeaway is that Enphase Energy appears poised for a further rally on rebounding energy demand. The company isn't seeing the sell-through demand at the forecasted levels, though higher than current sales.
Investors can ride the current rally, but the stock should be quickly dumped. Even the bullish Barclays call only set a $134 price target on the stock now trading at close to $130.
If you'd like to learn more about how to best position yourself in under valued stocksmispriced by the market to end May, consider joining Out Fox The Street.
The service offers a model portfolio, daily updates, trade alerts and real-time chat. Sign up now for a risk-free 2-week trial to started finding the best stocks with potential to double and triple inthe next few years.
According to the Complaint, the Company made false and misleading statements to the market. Enphase suffered a decrease in battery shipments to both Europe and California. The Company was experiencing a slowdown in its battery adoption.
Enphase Energy has a consensus rating of Moderate Buy which is based on 17 buy ratings, 8 hold ratings and 3 sell ratings. The average price target for Enphase Energy is $127.38. This is based on 28 Wall Streets Analysts 12-month price targets, issued in the past 3 months.
Based on short-term price targets offered by 35 analysts, the average price target for Enphase Energy comes to $127.22. The forecasts range from a low of $45.82 to a high of $173.00. The average price target represents a decline of 5.43% from the last closing price of $134.52.
Look out for ENPH's next earnings release expected on July 25, 2024. For the next earning release, we expect the company to report earnings of $0.51 per share, reflecting a year-over-year decrease of 65.31%.
Enphase Energy (ENPH -3.03%) was one of the worst-performing stocks in the S&P 500 last year. Before Wednesday's pop, the start to 2024 was also bad, as Enphase lost 24% of its value from year-end 2023 to Feb. 6. Enphase is still down for the year, even after surging 16.9% on Wednesday, February 7th.
Enphase Energy , a global energy technology company based in Fremont, CA , is the world's leading supplier of microinverter-based solar and battery systems that enable people to harness the sun to make, use, save, and sell their own power—and control it all with a smart mobile app.
The Enphase stock holds a sell signal from the short-term Moving Average; at the same time, however, there is a buy signal from the long-term average. Since the short-term average is above the long-term average there is a general buy signal in the stock giving a positive forecast for the stock.
Enphase Energy stock has received a consensus rating of buy. The average rating score is and is based on 62 buy ratings, 28 hold ratings, and 5 sell ratings.
The Enphase Energy stock prediction for 2025 is currently $ 249.72, assuming that Enphase Energy shares will continue growing at the average yearly rate as they did in the last 10 years. This would represent a 109.83% increase in the ENPH stock price.
Total debt on the balance sheet as of March 2024 : $1.30 B
According to Enphase Energy 's latest financial reports the company's total debt is $1.30 B. A company's total debt is the sum of all current and non-current debts.
The company's revenue is expected to decline significantly in 2024, deeper than the expected industry contraction. ENPH's financial performance was disappointing, with a negative operating income and no clear plan to reduce costs. Valuation analysis suggests the stock is overvalued.
If you have shading impacts on your roof, then the additional cost of Enphase micro inverters compared to standard string inverters will likely pay for itself in the first couple of years. In these circ*mstances we would definitely recommend Enphase or a power optimised solution like SolarEdge.
ENPHASE ENERGY INC (ENPH) is a large-cap growth stock in the Semiconductors industry. The rating using this strategy is 77% based on the firm's underlying fundamentals and the stock's valuation.
Largest shareholders include Vanguard Group Inc, BlackRock Inc., State Street Corp, VTSMX - Vanguard Total Stock Market Index Fund Investor Shares, Baillie Gifford & Co, Invesco Ltd., Swedbank AB, VFINX - Vanguard 500 Index Fund Investor Shares, Geode Capital Management, Llc, and Voya Investment Management Llc .
By eliminating parts that are known to break, like fans, Enphase has achieved a microinverter failure rate of just 0.05%. That's how we can provide a 25-year limited microinverter warranty and 15 years for batteries.
Enphase IQ, however, gives a 4,000-cycle warranty, which is 800 times greater than the 3,200-cycle warranty offered by Tesla Powerwall. Although the two batteries have the same lifespan of 10 years and 70% capacity, Enphase IQ's warranty benefits them by including coverage for 800 additional cycles.
If you have shading impacts on your roof, then the additional cost of Enphase micro inverters compared to standard string inverters will likely pay for itself in the first couple of years. In these circ*mstances we would definitely recommend Enphase or a power optimised solution like SolarEdge.
Introduction: My name is Kelle Weber, I am a magnificent, enchanting, fair, joyous, light, determined, joyous person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
