While a strong performer during 2022, at the start of 2023, sentiment for Enphase Energy (NASDAQ:ENPH) made a big move in the bearish direction. In January, the market bailed on ENPH stock. This sent shares in this maker of micro-inverters for home and business solar systems down significantly in a matter of weeks.
More recently, however, it appears that investors may be starting to change their tune when it comes to ENPH. After pulling back following the company’s latest earnings release, the stock has stabilized, moving higher in recent days.
One sell-side analyst has also issued an upgrade on shares, conceding that the perceived risks with Enphase are now baked into its valuation (more below). Fortunately for those looking to enter or add to a position, this positive sentiment shift has only just started. There’s still the opportunity to buy this promising growth play at an attractive entry price.
| ENPH | Enphase Energy | $213.72 |
The Market is Warming Back Up to ENPH Stock
As I discussed last month, Enphase shares were the victim of short-sighted bearishness during January and for much of February. At the time, there was concern that the company’s growth would slow down considerably during 2023.
In the past few weeks, the market has warmed back up to ENPH stock. It took some time, but investors perhaps eventually realized that the company’s latest results and updates to guidance were stellar and indicative of further success ahead.
For the December quarter, Enphase beat on both revenue and earnings. Guidance for the current quarter also came in ahead of estimates.
Given these promising numbers, plus management’s commentary about future demand drivers, Janney’s Sean Milligan upgraded ENPH on Feb. 27, giving the stock a “buy” rating, and a $282 per share price target. Like I mentioned above, Milligan also conceded that, with ENPH’s pullback, risks such as slowing demand are “priced-in.”
While the market’s view on the stock has improved only slightly, enabling it to move back above $200 per share, there are quite a few catalysts that down the road could make the market as bullish on ENPH as I am today.
Enphase’s Big Growth Tailwind
After a banner year in 2022, there is likely going to be some degree of growth deceleration this year. Even the top end of analyst estimates calls for $3.64 billion this year. This implies a slowdown in top-line growth from nearly 69% to around 56.2% (still nothing to sneeze at).
The top end of analyst earnings forecasts calls for ENPH’s earnings per share to more than double once again, from $2.94 per share to $6.18 per share. Even if EPS only meets consensus ($5.49 per share), that would mean around 86.7% earnings growth. Not too shabby.
This company has a massive growth tailwind in the solar tax credits provided by the Inflation Reduction Act. These stand to materially increase the adoption of home solar systems in the U.S.
Enphase is poised to benefit strongly from this trend. As Barron’s recently reported, Enphase has the advantage of lower shipping costs, plus the ability to say that its microinverters are made in America.
The Verdict
The prospect of accelerating demand in the U.S. isn’t the only thing Enphase has going for it. Much of the company’s success last year was the result of rapid adoption of home solar systems in Europe in response to Russia’s invasion of Ukraine.
As seen in recent press releases, Enphase continues to grow its European presence. For example, in January, the company announced it has formed a partnership with Enerix, a German decentralized energy systems provider, in order to offer its products to customers in Germany and Austria.
Put it all together, and there’s much to suggest that this “future of energy” play will stay in high growth mode for quite some time. Before it surges again, as investors become increasingly aware of this fact, consider now a great time to pounce on ENPH stock.
ENPH stock earns an A rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in ENPH. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.