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Enphase Energy Surges 30% on Record Q2 Earnings

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Aug. 1 2019, Published 1:14 p.m. ET

Enphase Energy (ENPH) stock skyrocketed more than 30% after the company reported record second-quarter earnings, closing at an all-time high of $28.15. The global energy technology company well exceeded Wall Street’s revenue and earnings estimates for the quarter.

Enphase’s positive growth outlook also fueled the stock surge. ENPH stock rose after the company reported its Q1 2019 numbers as well, and has risen almost 500% this year. Meanwhile, the broader-market S&P 500 has risen just 19%.

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Stock notably overbought

Enphase’s stock volumes swelled yesterday, with more than 22.2 million shares changing hands. In comparison, its three-month average daily trading volume is 3.6 million. Furthermore, Enphase’s RSI (relative strength index) score of 90 suggests it’s deep into overbought territory. RSI scores above 70 and below 30 suggest a probable reversal in stock direction.

Several brokerages raised their target price for Enphase after its strong Q2 release. Northland Capital raised its target price to $28, Craig-Hallum Capital Group increased it from $25 to $31, and Wainwright raised it from $16 to $36, increasing its rating from “neutral” to “buy.”

Enphase Energy’s growth outlook

In the second quarter, Enphase’s revenue rose 77% YoY (year-over-year). Management foresees this strong growth continuing. In Q3, the company expects its revenue to double YoY to $170.0 million–$180.0 million.

This year, analysts expect Enphase to earn $0.76 per share. But considering recent trends, the solar microinverter maker could surpass analysts’ forecasts. Solar panel installations are expected to increase by 25% YoY this year. This positive outlook bodes well for Enphase, a key technology solutions provider for panel makers.

Enphase peer SolarEdge Technologies (SEDG) is set to release its second-quarter results on August 6. Analysts have a positive outlook for its Q2 earnings as well, and the stock has rallied more than 80% this year. It will be interesting to see if its quarterly numbers can fuel the stock’s momentum further.

Enphase Energy’s recent rally was indeed astounding. But how does its valuation look? It’s currently trading at approximately 30 times its forward earnings for the year, which seems pricey. In comparison, broader markets are trading around 16 times their forward earnings.

Analysts’ target price for Enphase also doesn’t look attractive. Their mean target of $29.10 implies an approximate 6% downside over the next year based on the stock’s current price of $30.80.

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