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Enphase Energy Expands Dutch Footprint: Buy Now or Hold the Stock?
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Enphase Energy Inc. (ENPH - Free Report) has recently entered into a strategic collaboration with Frank Energie, the Netherlands’ energy provider, thereby enhancing its presence in the Dutch energy market. Through this partnership, Frank Energie customers using Enphase solar and battery systems can now optimize their return on investment (ROI) and shorten the system's payback period by participating in the grid imbalance energy marketplace.
In particular, Dutch homeowners using ENPH’s solar plus battery systems will be able to more than triple their lifetime earnings over 25 years compared to solar-only systems through virtual power plants. This would surely attract more solar customers to choose Enphase products, which in turn should boost its customer base and revenues from the Netherlands.
With the Netherlands power market projected to witness a CAGR of more than 7% during the 2023-2035 period (as per GlobalData’s October 2024 report), the growth prospects for ENPH remain immense in this nation as renewable energy is expected to constitute a larger share of the power source. This might lure solar investors to add ENPH stock to their portfolio.
However, to assert if it would be profitable to add this to your portfolio right now or wait a little longer, let’s delve deeper into the stock’s year-to-date performance, long-term prospects as well as risks (if any) to investing in the same. The idea is to help investors make a prudent decision.
ENPH Stock Lags Industry, Sector & S&P500
Enphase Energy’s shares have lost 45.9% in the year-to-date period, underperforming the Zacks Solar industry’s decline of 37% as well as the broader Zacks Oil-Energy sector’s growth of 5.4%. The stock also lagged the S&P 500’s surge of 27.8% in the same period.
A similar dismal performance has been delivered by other industry players, such as Emeren Group (SOL - Free Report) , Sunrun (RUN - Free Report) and SolarEdge Technologies (SEDG - Free Report) , whose shares have lost 30.4%, 46.1% and 86.3%, respectively, year to date.
ENPH Stock YTD Performance
Image Source: Zacks Investment Research
What Caused ENPH Stock to Lose So Much?
Enphase Energy’s shares have been performing poorly at the bourses for quite some time now owing to its dismal operating performance for the past couple of quarters. Its third-quarter 2024 revenues plunged 30.9% year over year, while its adjusted earnings declined 36.3%. Moreover, the company generated cash and cash equivalents worth $256.3 million as of Sept. 30, 2024. The figure came in lower than its cash balance of $288.7 million as of Dec. 31, 2023.
The primary reason behind such poor operational performance has been the persistent unfavorable demand scenario that Enphase’s products have been experiencing in recent times in the U.S. and European solar markets. This sluggish demand trend has, in turn, adversely impacted the company’s shipment of products, particularly its microinverters, thereby affecting both its top and bottom-line figures.
What Lies Ahead for ENPH Stock?
To expand its customer base and thereby improve revenue generation prospects, Enphase Energy has been consistently investing in innovation and bringing its state-of-the-art solar plus battery systems into the global solar market. It is imperative to mention that ENPH is currently on track to launch its IQ9 microinverters, powered by gallium nitride technology, in the second half of 2025.
It also aims to launch its second-generation IQ EV charger in several European countries in the fourth quarter of 2024, thereby tapping into a $1.4 billion annual market. The company plans to launch its IQ8HC microinverters in Japan in early 2025. Such launches should bolster ENPH’s long-term growth opportunities.
In line with this, the consensus estimate for ENPH’s long-term (three-to-five years) earnings growth rate is pegged at 3.6%.
A quick sneak peek at its near-term estimates reflects a similar story, most likely driven by the improving demand scenario across the United States and Europe. This can be expected to boost ENPH’s operations.
Earnings Estimates for ENPH
The top and bottom-line estimates for fourth-quarter 2024 and full-year 2025 put up a promising picture.
However, its 2024 estimates suggest a dismal scenario due to its poor performance in the first three quarters of 2024. The downward revision in its earnings estimate implies investors’ declining confidence in the stock.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
ENPH Stock Trading at a Premium
In terms of valuation, ENPH’s forward 12-month price-to-earnings (P/E) is 19.70X, a premium to its peer group’s average of 7.97X. This suggests that investors will be paying a higher price than the company's expected earnings growth compared to that of its peer group. The company’s P/E ratio also looks stretched when compared to its five-year median.
Image Source: Zacks Investment Research
Risks to Consider Before Buying ENPH
The global supply market for semiconductors, integrated circuits and other electronic components used in some of Enphase’s products has recently experienced significant constraints and disruptions. This constrained supply environment has adversely impacted and could further affect component availability, lead times and costs. It might also increase the likelihood of unexpected cancellations or delays in the previously committed supply of key components for Enphase Energy.
Moreover, ENPH is highly debt-ridden, as evident from its long-term debt-to-capital ratio of 56.31X, much higher than its industry’s 48.95X.
Final Thoughts
To summarize, it is not advisable to add this stock to one’s portfolio right now, considering its premium valuation, dismal year-to-date performance and high leverage.
Image: Bigstock
Enphase Energy Expands Dutch Footprint: Buy Now or Hold the Stock?
Enphase Energy Inc. (ENPH - Free Report) has recently entered into a strategic collaboration with Frank Energie, the Netherlands’ energy provider, thereby enhancing its presence in the Dutch energy market. Through this partnership, Frank Energie customers using Enphase solar and battery systems can now optimize their return on investment (ROI) and shorten the system's payback period by participating in the grid imbalance energy marketplace.
In particular, Dutch homeowners using ENPH’s solar plus battery systems will be able to more than triple their lifetime earnings over 25 years compared to solar-only systems through virtual power plants. This would surely attract more solar customers to choose Enphase products, which in turn should boost its customer base and revenues from the Netherlands.
With the Netherlands power market projected to witness a CAGR of more than 7% during the 2023-2035 period (as per GlobalData’s October 2024 report), the growth prospects for ENPH remain immense in this nation as renewable energy is expected to constitute a larger share of the power source. This might lure solar investors to add ENPH stock to their portfolio.
However, to assert if it would be profitable to add this to your portfolio right now or wait a little longer, let’s delve deeper into the stock’s year-to-date performance, long-term prospects as well as risks (if any) to investing in the same. The idea is to help investors make a prudent decision.
ENPH Stock Lags Industry, Sector & S&P500
Enphase Energy’s shares have lost 45.9% in the year-to-date period, underperforming the Zacks Solar industry’s decline of 37% as well as the broader Zacks Oil-Energy sector’s growth of 5.4%. The stock also lagged the S&P 500’s surge of 27.8% in the same period.
A similar dismal performance has been delivered by other industry players, such as Emeren Group (SOL - Free Report) , Sunrun (RUN - Free Report) and SolarEdge Technologies (SEDG - Free Report) , whose shares have lost 30.4%, 46.1% and 86.3%, respectively, year to date.
ENPH Stock YTD Performance
Image Source: Zacks Investment Research
What Caused ENPH Stock to Lose So Much?
Enphase Energy’s shares have been performing poorly at the bourses for quite some time now owing to its dismal operating performance for the past couple of quarters. Its third-quarter 2024 revenues plunged 30.9% year over year, while its adjusted earnings declined 36.3%. Moreover, the company generated cash and cash equivalents worth $256.3 million as of Sept. 30, 2024. The figure came in lower than its cash balance of $288.7 million as of Dec. 31, 2023.
The primary reason behind such poor operational performance has been the persistent unfavorable demand scenario that Enphase’s products have been experiencing in recent times in the U.S. and European solar markets. This sluggish demand trend has, in turn, adversely impacted the company’s shipment of products, particularly its microinverters, thereby affecting both its top and bottom-line figures.
What Lies Ahead for ENPH Stock?
To expand its customer base and thereby improve revenue generation prospects, Enphase Energy has been consistently investing in innovation and bringing its state-of-the-art solar plus battery systems into the global solar market. It is imperative to mention that ENPH is currently on track to launch its IQ9 microinverters, powered by gallium nitride technology, in the second half of 2025.
It also aims to launch its second-generation IQ EV charger in several European countries in the fourth quarter of 2024, thereby tapping into a $1.4 billion annual market. The company plans to launch its IQ8HC microinverters in Japan in early 2025. Such launches should bolster ENPH’s long-term growth opportunities.
In line with this, the consensus estimate for ENPH’s long-term (three-to-five years) earnings growth rate is pegged at 3.6%.
A quick sneak peek at its near-term estimates reflects a similar story, most likely driven by the improving demand scenario across the United States and Europe. This can be expected to boost ENPH’s operations.
Earnings Estimates for ENPH
The top and bottom-line estimates for fourth-quarter 2024 and full-year 2025 put up a promising picture.
However, its 2024 estimates suggest a dismal scenario due to its poor performance in the first three quarters of 2024. The downward revision in its earnings estimate implies investors’ declining confidence in the stock.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
ENPH Stock Trading at a Premium
In terms of valuation, ENPH’s forward 12-month price-to-earnings (P/E) is 19.70X, a premium to its peer group’s average of 7.97X. This suggests that investors will be paying a higher price than the company's expected earnings growth compared to that of its peer group. The company’s P/E ratio also looks stretched when compared to its five-year median.
Image Source: Zacks Investment Research
Risks to Consider Before Buying ENPH
The global supply market for semiconductors, integrated circuits and other electronic components used in some of Enphase’s products has recently experienced significant constraints and disruptions. This constrained supply environment has adversely impacted and could further affect component availability, lead times and costs. It might also increase the likelihood of unexpected cancellations or delays in the previously committed supply of key components for Enphase Energy.
Moreover, ENPH is highly debt-ridden, as evident from its long-term debt-to-capital ratio of 56.31X, much higher than its industry’s 48.95X.
Final Thoughts
To summarize, it is not advisable to add this stock to one’s portfolio right now, considering its premium valuation, dismal year-to-date performance and high leverage.
Nevertheless, those who already own this Zacks Rank #3 (Hold) company’s shares may continue to do so, considering its long-term growth prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.