Company Reports

We attended the RE+ conference and trade show in Anaheim, California. The conference and exhibit hall provided an opportunity to meet with companies as well as see latest product unveilings. We highlight our key takeaways below.

Enphase Energy is in many ways the envy of all solar companies. It has approximately 60% market share in US residential solar inverters, best-in-class profitability, and a capital-light business model. Much of Enphase’s success is attributable to its microinverters, which we view as more differentiated than peer solar inverter offerings. But a key drawback of microinverters is their limited addressable market. Microinverters are a premium product best suited for small (rooftop) solar systems. Hence, Enphase has historically focused on the residential market and in limited geographies—the US, Netherlands, and France. We view the key driver of the shares over the coming years to be Enphase's success in penetrating new end markets (commercial) and new geographies while maintaining its superior margin profile.

The key takeaway from Enphase's second-quarter results was that channel inventory destocking, which has weighed significantly on results in recent quarters, appears complete. Revenue and gross margin performance and guidance were broadly in line with our thinking, and we made minimal changes to our estimates. Hence, we are maintaining our $85 fair value estimate. Enphase remains near the top of our clean energy watchlist, but we view shares as slightly overvalued.

On June 18, SMA Solar reduced its sales and EBITDA guidance by 20% and 60%, respectively, for fiscal 2024. SMA shares plunged 31% the day following the profit warning. US inverter companies Enphase and SolarEdge are trading approximately 6% lower at the time of writing following the announcement.

We are maintaining our $85 fair value estimate for no-moat Enphase following first-quarter results. We are lowering near-term revenue estimates, but this is offset by higher gross margin assumptions on new products. Enphase continues to be near the top of our clean energy watchlist, but we await a more attractive entry point.

We raise our fair value estimate for no-moat Enphase Energy to $85 from $75 following discussions with the company. The main driver of our fair value increase is higher gross margin assumptions for the company's microinverters, partially offset by lower gross margin assumptions for storage sales. We continue to have Enphase near the top of our clean energy watchlist but await a more attractive entry point.

Enphase is the world leader in microinverter technology for distributed solar systems.

We maintain our $75 fair value estimate for no-moat Enphase Energy following the company's fourth-quarter results. We continue to have Enphase near the top of our clean energy watchlist, but await a more attractive entry point.

Clean energy stocks have had a roller-coaster 18 months. Optimism following the passage of the Inflation Reduction Act in August 2022 gave way to rising interest rates in 2023. We highlight three key themes for investors to focus on in 2024: interest rates, U.S. policy, and profitability.

We lower our fair value estimate for no-moat Enphase Energy to $75 from $120 following the company's third-quarter results. The primary driver of our lower valuation is a reduced long-term revenue forecast, which also results in reduced operating margins. We view shares as fairly valued.

Enphase is the world leader in microinverter technology for distributed solar systems.

This week we attended the RE+ conference and trade show in Las Vegas. The conference and exhibit hall provided an opportunity to meet with companies as well as see latest product unveilings. We highlight our key takeaways below.

Enphase is the world leader in microinverter technology for distributed solar systems.

After updating our modeling assumptions following second-quarter earnings, we lower our fair value estimate for Enphase to $120 per share from $140. Similarly, we reduce our SolarEdge fair value estimate to $216 per share from $238. The primary driver of our lowered valuations is a slight increase to our cost of capital assumption (100 basis points) and modest declines in our margin expectations. We reiterate our no-moat and Very High Uncertainty ratings for both companies. We view shares of SolarEdge as undervalued, while Enphase is fairly valued following the selloff in recent weeks.

We have lowered our fair value estimate for no-moat Enphase Energy to $140 per share from $165 following second-quarter results. The primary drivers of our fair value estimate change are reduced volume and gross margin forecasts for the company's microinverters. The shares were trading lower after hours (down 13% at the time of writing) as investors continue to recalibrate their outlook amid weak demand for rooftop solar in the United States. We view the shares as fairly valued following our estimate reduction but believe they are approaching a bottom.

Enphase is the world leader in microinverter technology for distributed solar systems.

We lower our fair value estimate for no-moat Enphase to $165 from $180 following first-quarter results. The drivers of our fair value change are a reduction in our volume and gross margin forecast for the company's microinverters. Enphase shares are trading sharply lower (down 20% at the time of writing) as investors adjust to a lower growth outlook driven by U.S. rooftop solar demand weakness. We view shares as fairly valued.

Enphase is the world leader in microinverter technology for distributed solar systems.

The passage of the Inflation Reduction Act was heralded as the largest climate legislation in U.S. history. As a result, the legislation has had an impact on technology adoption expectations and, in some cases, the competitive landscape. While the legislation has already led to a dramatic impact on industry activity, we believe market participants are awaiting additional clarifications from the IRS on certain incentives prior to making further investments. We highlight three specific incentives to watch as the U.S. Department of the Treasury issues clarifications in the months ahead.

Rising adoption of residential batteries represents a secular growth driver for our solar inverter coverage, Enphase and SolarEdge. Batteries accounted for approximately 12% and 1% of revenue for Enphase and SolarEdge in 2021, respectively, but we expect this to rise to 21% and 20% in 2026.