Is Enphase Energy Clearing a Low Bar or a Large Hurdle?
ENPH stock is up 17% after falling 55% from its all-time high closing price of $267.74. With Enphase getting ready to report earnings, investors will be looking to find out...
For bullish investors will a strong earnings report be enough
Enphase Energy (NASDAQ: ENPH) is up 17% since closing at $119.97 on January 27, 2022. At that point, ENPH stock was down 55% from its closing price of $267.74 that it hit on November 19, 2021. It's likely that investors became concerned about the stock's valuation. With Enphase getting ready to report earnings on February 8, the question that investors will be looking to answer is has Enphase stock found a bottom?
The good news is that investors are likely to see ENPH stock get a bump from its earnings report. The consensus is for the company to post earnings per share of 57 cents on revenue of $396.48 million. Those number would be an 11% year-over-year (YOY) increase in EPS and a nearly 50% (49%) YOY increase in revenue. Moreover, if those numbers play out – or if they're even better – the company's net income will also continue to rise.
What About the Death Cross?
While the fundamentals look good for Enphase, the technical chart is painting a different picture. Investors can see that the ENPH stock chart is likely to form a death cross. This occurs when the 50-day simple moving average (SMA) crosses below the 200-day SMA. In most cases, this is a bearish signal.
However, that may not be the case with ENPH stock. That's because, since the company went public in 2017, whenever Enphase stock has formed a death cross, the stock has gone up shortly after.
Do with that as you will. What I can tell you is that the company has posted solid YOY stock price growth. And it was headed for the same last year until it sold off.
Is a Strong Story Enough?
So, with fundamentals and technicals telling us a different story, we're left with looking at the sector outlook. Among solar stocks, Enphase has a strong story that differentiates it from the pack. The company doesn't sell or install solar panels. They sell components that allow consumers to monitor their solar system. Oone of their signature products is their microinverters.
The microinverters serve two key objectives. Specifically, the microinverters convert direct current (DC) power from solar panels to alternating current (AC) power. This addresses a significant pain point for solar panel installations. That is the system allows the efficient use of solar power or cloudy days or during the evening hours. The microinverters also remove the risk of a single-point failure.
And the company has launched its next generation of microinverters (the IQ8) that provides an industry first solution for powering essential appliances during solar panel outages even when there is no home battery.
That may be one reason why Enphase reported an increase in product interest in the Northeast after severe storms battered the region.
And the company is looking to expand into India with its Ensemble-in-a-Box portable power solution that is ideal for countries with a developing power infrastructure.
ENPH Stock Looks to Shine Long-Term
Even after the stock's sharp sell-off, Enphase still has a gaudy price-to-earnings ratio of 123.38. Growth-minded investors may be willing to overlook this as the company is still in its growth phase. And the company has shown the ability to grow both earnings and revenue in the five years it's been trading publicly.
According to the analysts tracked by MarketBeat, the consensus price target for ENPH stock is $240.04, which is a 68% upside from its price as of this writing. What may be more compelling is that, although several analysts have recently lowered their price targets for Enphase stock, many of the new estimates are still higher than the consensus target.
Like many market sectors, solar stocks face some headwinds, including rising interest rates. But the long-term outlook for the sector looks strong and Enphase Energy offers an innovative product and a diversified supply chain. Both of those factors point to strong long-term growth, although not without its ups and downs.
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