Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 19 Mar, 25 | ENPH | Buy | USD 61.38 | USD 64.5 | USD 70.0 | 20 days | 14.0% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Enphase Energy, Inc., together with its subsidiaries, designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry in the United States and internationally. The company offers semiconductor-based microinverter, which converts energy at the individual solar module level and combines with its proprietary networking and software technologies to provide energy monitoring and control. It also provides microinverter units and related accessories, an IQ gateway; IQ batteries; the cloud-based Enlighten monitoring service; storage solutions; and electric vehicle charging solutions, as well as design, proposal, permitting, and lead generation services. The company sells its solutions to solar distributors; and directly to large installers, original equipment manufacturers, strategic partners, and homeowners, as well as through its legacy product upgrade program or online store. Enphase Energy, Inc. was incorporated in 2006 and is headquartered in Fremont, California.
Improved Quarterly Profitability – Enphase Energy reported a 25% increase in GAAP net income, rising from $45.8 million in Q3 2024 to $62.2 million in Q4 2024. Non-GAAP net income also increased 42% from $88.4 million to $125.9 million during the same period
Strong Free Cash Flow and Cash Position – The company generated $159.2 million in free cash flow in Q4 2024 and ended the quarter with $1.72 billion in cash, cash equivalents, and marketable securities, providing financial stability and flexibility for future investments
Declining Annual Revenue – Enphase Energy's total revenue for fiscal year 2024 was $1.33 billion, a 42% decrease from $2.29 billion in 2023. This significant decline indicates market challenges and lower product demand compared to the previous year
Lower IQ Battery Shipments – The company shipped 152.4 megawatt hours of IQ Batteries in Q4 2024, a 12% drop from 172.9 megawatt hours in Q3 2024. This decrease reflects reduced demand for battery storage solutions
Key investment risks for Enphase Energy include declining annual revenue, softening demand in international markets (particularly Europe), potential reductions in government incentives like the IRA tax credits, and increased competition in the solar and battery storage industry
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 61.38 | 51.0 | 64.5 | 70.0 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Financial Performance Overview
Enphase Energy reported total revenue of $382.7 million for the fourth quarter of 2024, showing a slight increase from $380.9 million in the third quarter. This growth was primarily driven by higher microinverter sales in the United States, which saw a 6% revenue increase, while European revenue declined by approximately 25% due to weakening demand. For the fiscal year 2024, total revenue was $1.33 billion, significantly lower than the $2.29 billion reported in 2023, reflecting overall market challenges.
Profitability and Margins
The company achieved a GAAP gross margin of 51.8% and a non-GAAP gross margin of 53.2% in Q4 2024, which included a net IRA benefit. Excluding this benefit, the non-GAAP gross margin stood at 39.7%, slightly higher than the 38.9% reported in Q3 2024. Operating income for the quarter was $54.8 million on a GAAP basis and $120.4 million on a non-GAAP basis. Net income also improved to $62.2 million GAAP and $125.9 million non-GAAP, reflecting strong operational efficiencies.
Cash Flow and Share Repurchase Program
Enphase Energy ended the fourth quarter with $1.72 billion in cash, cash equivalents, and marketable securities. Free cash flow for the quarter was $159.2 million, while capital expenditures totaled $8.1 million. The company also continued its share repurchase program, buying back approximately 2.88 million shares at an average price of $69.25 per share for a total of $199.7 million. An additional $5.0 million was spent on share withholding for employee stock vesting, reducing diluted shares by 68,532.
Product Shipments and Expansion
During the quarter, Enphase shipped 1.69 million microinverters from its U.S.-based contract manufacturing facilities, qualifying for 45X production tax credits. IQ Battery shipments totaled 152.4 megawatt hours, down from 172.9 megawatt hours in Q3 2024. The company introduced several new products, including the IQ PowerPack 1500, a portable energy system, and the IQ EV Charger 2 in Europe. Additionally, the IQ Battery 5P with FlexPhase was launched in Germany, Austria, and Switzerland to provide backup power solutions for single- and three-phase installations.
Global Market Expansion and Business Developments
Enphase Energy continued expanding its market presence, entering Vietnam and Malaysia with its IQ8P Microinverters and launching solar solutions in Colombia, Panama, and Costa Rica. The company also integrated with Octopus Energy’s smart tariffs in the UK, enabling customers to optimize electricity costs. Other key initiatives included compliance with the Build America, Buy America Act for its IQ8 Microinverters and collaborations with energy providers in the Netherlands for grid balancing solutions.
First Quarter 2025 Financial Outlook
For Q1 2025, Enphase Energy projects revenue between $340.0 million and $380.0 million, including 150 to 170 megawatt hours of IQ Battery shipments. Gross margins are expected to range from 46.0% to 49.0% on a GAAP basis and 48.0% to 51.0% on a non-GAAP basis with net IRA benefits. Excluding these benefits, non-GAAP gross margins are projected to be between 38.0% and 41.0%. GAAP operating expenses are estimated between $143.0 million and $147.0 million, while non-GAAP operating expenses are expected to range from $81.0 million to $85.0 million. The company anticipates an annualized effective tax rate of 17.0% to 19.0% for 2025.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on Enphase Energy Inc (NASDAQ: ENPH) at the closing market price of USD 61.38, as on March 18, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Technology Industry: Solar
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| ENPH Enphase Energy Inc |
1.00 2.22% | 46.07 | 136.61 | 18.32 | 6.79 | 9.24 | 6.51 | 53.17 |
| FSLR First Solar Inc |
6.29 4.80% | 137.39 | 16.61 | 9.35 | 5.36 | 2.72 | 5.21 | 11.40 |
| NXT Nextracker Inc. Class A Common Stock |
2.00 4.98% | 42.13 | 16.44 | 12.44 | 2.71 | 15.50 | 2.46 | 15.56 |
| XISHY Xinyi Solar Holdings Limited |
0.10 1.49% | 6.80 | 11.55 | 14.93 | 0.22 | 1.24 | 0.24 | 1.12 |
| XNYIF Xinyi Solar Holdings Limited |
- -% | 0.27 | 10.10 | 13.72 | 0.22 | 1.37 | 0.24 | 1.12 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is March 18, 2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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