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Is Enphase Energy Attractive after Its 50% Fall?

Vineet Kulkarni - Author

Nov. 13 2019, Published 1:30 p.m. ET

There was a notable plunge in Enphase Energy (ENPH) stock after its third-quarter earnings. Since reaching an all-time high in August, the stock has almost halved in value. However, its recent quarterly earnings weren’t so bad, and it’s looking attractive in the wake of its recent fall.

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Enphase Energy’s solid third-quarter earnings

Enphase Energy reported net income of $39 million on total revenue of $180 million during the third quarter. Both its profits and revenue more than doubled in the third quarter compared to the same quarter last year. Management issued revenue guidance of $205 million for the fourth quarter of 2019, which came in line with analysts’ estimates. However, the guidance suggests revenue growth of just 13% sequentially, which might have concerned investors. In the last two quarters, Enphase Energy’s revenues have risen approximately 35% sequentially.

Analysts expect its 2020 earnings to increase to $135 million, an increase of 16% YoY. As the solar industry is poised to grow, there seems to be huge growth potential ahead for Enphase Energy as a key technology provider for panel makers.

Interestingly, solar inverter stocks have shown solid momentum this year. Enphase Energy stock started the year below the $5 level and crossed $35 in August, marking an increase of more than 650%. The stock is still sitting at a handsome gain of more than 300% YTD after its recent steep fall.

SolarEdge Technologies: Peer solar inverter maker

Peer solar inverter maker SolarEdge Technologies (SEDG) has surged around 130% YTD. It reported yet another strong performance in the third quarter. Its revenue rose more than 70%, while its net income doubled YoY. A flurry of brokerages raised SEDG’s target price after its record third-quarter release. Read SolarEdge Posted Solid Q3 Earnings for more info. SolarEdge stock has stayed relatively strong, but it’s down almost 20% from the all-time high it reached last month.

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The two solar technology stocks look appealing at the moment from a valuation perspective as well. Enphase Energy stock is trading at around 20 times its estimated earnings for the next 12 months. A valuation multiple close to 20 times earnings for a growth stock seems reasonable. In comparison, SolarEdge stock is trading at 17 times its forward earnings.

ENPH: Analysts’ views

Wall Street analysts have given Enphase Energy stock a mean target price of $30.67 against a current market price of $19.12. This indicates a potential upside of more than 60% for the next 12 months. Analysts remain cautious on ENPH.

SolarEdge Technologies stock offers an estimated upside of 12% against its current market price of $80.75. Analysts have given SEDG a mean target price of $90.25.

Of the total 12 analysts covering SEDG, six analysts give it a “buy,” three give it a “hold,” two give it a “strong buy,” and one gives it a “sell.”

Top solar panel maker First Solar (FSLR) remained weak after its third-quarter earnings release. To learn about how it’s placed compared to its peers, read First Solar Stock Still Looks Weak after Q3 Earnings.


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