Enphase Energy’s (ENPH), stock has been moving sideways in this year, as investors continue to be concerned about the turnaround. On Wednesday the stock price was $110, which is where it had been for the last few weeks. The price of the stock is 67% lower than its highest level in 2022. This gives it a value over $14.1billion.
ENPH catalysts:
Enphase Energy’s share price is moving sideways, as investors focus on the three main potential catalysts for solar energy.
First, it’s political. After the debate between Donald Trump and Kamalah Harris in which many people thought that Kamalah had an improved night. This debate may have a significant impact on the outcome of an election expected to be close.
Idealistically, Harris would be seen as more friendly to the solar industry than Trump who is focused on fossil fuels.
As I said in my article on First Solar,, the president of the US has a small impact on stocks within a particular industry. Enphase’s stock has fallen sharply despite the fact that Kamala and Joe Biden are the two leaders.
The stock could still see gains due to the story of her victory in the November election.
The company could also benefit from Federal Reserve’s actions, as the Fed is likely to begin reducing interest rates in the next few weeks.
The latest data shows that US inflation fell to 2,5% in August. This is the lowest rate in more than two years. The Fed is likely to cut interest rates next week by 0.25% and then two additional times later in the year.
Solar energy has had a tough time in recent years due to higher interest rates. The Fed raised rates in response to the rising inflation. This was the first time the Fed had done so for over 20 years.
Enphase, and many other companies, will therefore benefit from the rate reductions, which make solar energy more affordable. Enphase CEO Badri Kottidaraman wrote to investors:
The solar industry has suffered from a slowdown of the overall demand. The main reasons for this were high interest rates, NEM 3.0 in California and macroeconomic conditions throughout Europe.
Enphase Energy can benefit thirdly from ongoing efforts to turn around the company by its management, and cost-saving measures that it has taken. Enphase Energy’s slowdown was largely due to the inventory reduction.
ENPH financial results
Enphase is in a state of distress, as the latest financial reports have shown. The company’s quarterly revenue was $303 million. This is a sharp drop from $711 million in the same period in 2023.
It is noteworthy that the company’s revenue in America grew by 32 percent, while it remained flat in Europe. In 2023, Europe became its largest market.
Enphase Energy has also seen its margins decline. In Q2, its gross margin dropped from 45.5% to 45.2%.
The company has been facing challenges. Its income dropped from $157 to just $10.8 millions.
Analysts predict that Enphase will make $1.4 billion in revenue this year, 38% less than last year. The company’s revenue will grow to $2.0 billion by 2025.
The company’s market capitalization of $14.9 billion and enterprise value of $14.63 trillion are both overvalued. Enphase’s net profit was $438m last year. This gives it a P/E trailing multiple of 34. That is expensive for a non-growing company. The company’s P/E forward ratio is 110. This is higher than companies such as Nvidia or Microsoft.
Enphase Energy’s long-term liabilities are $1.2 billion, compared to $1.6 billion of cash and investments for the short term. Its balance sheet is quite solid.
Enphase Energy Stock Price Analysis
TradingView ENPH Chart
Weekly chart showing ENPH’s share price at its peak of $340 by 2022, then a sharp drop to $110 in the present day as the company faced significant challenges.
In December, the stock created a death-cross pattern when moving averages of 200 weeks and 50 weeks crossed. The stock formed a triangle pattern in green since then.
The triangle pattern forms part of the pennant bearish pattern. This pattern often causes more decline, particularly now that the pattern is approaching the level of confluence.
The stock has remained below the moving averages while the accumulation/distribution indicator has continued falling.
At this point, it is likely that the stock price will move a lot in the next few weeks. The move can happen either way, but it is likely to be a bearish one. It could drop as low as $74.9 in November 2023, the lowest it has ever been.
Enphase Energy nears pivotal price – buy or sell this post? This post may change as new information becomes available
