Enphase Energy, a leading manufacturer of solar inverters, is experiencing a decline in its stock value following the announcement that it will be reducing shipments to address an inventory backlog. This decision has resulted in a lower revenue forecast for the third quarter, which has disappointed Wall Street.
According to analysts, Enphase’s stock is expected to face continued pressure in the near term due to these developments.
In its recent update, Enphase disclosed that its anticipated revenue for the third quarter, ending in September, is projected to fall within the range of $550 million to $600 million. However, this is below the market expectation of approximately $646 million as suggested by analysts tracked by FactSet.
During a conference call discussing the company’s performance, CEO Badrinarayanan Kothandaraman provided insight into the reasons behind this shortfall. He explained that weak demand for solar-power equipment in the United States, primarily caused by high interest rates deterring potential customers from adopting these systems, has contributed to the decreased revenue. Furthermore, Enphase faces significant challenges in states like Texas, Florida, and Arizona where utility rates are comparably lower.
Enphase attributed the buildup of inventory in its distribution channels to slower sales over the past two quarters. Notably, microinverter sell-through rates in the United States during the first half of 2023 were approximately 20% lower than the peak witnessed in the fourth quarter of the previous year.
In response to these market conditions, Enphase has devised a strategy to mitigate the issue by reducing shipments in the current quarter.
This setback for Enphase Energy underscores the impact of weak demand and inventory concerns on its financial performance. The company will need to navigate these challenges to regain stability and maintain its position as a leader in the solar industry.
Stock Market Update: Enphase Energy Shares Fall as Competitors Gain Traction
Enphase Energy (ENPH) experienced an 11% drop in its shares to $148.50 during early trading on Friday. This decline puts the stock on track for its lowest closing price since May 12, 2022, when it finished the day at $140.94, according to Dow Jones Market data. Another inverter seller, SolarEdge Technologies (SEDG), also saw a 5% decrease in its shares on Friday.
KeyBanc Capital Markets analyst Sophie Karp expressed concern about the company’s ability to achieve a desired reset in channel inventory levels. Karp rates the stock as Overweight and has set a target price of $267, based on the company’s potential for long-term growth. However, she anticipates that the stock will face pressure in the near term until clarity emerges on demand or inventory.
Joseph Osha from Guggenheim shares a similar view, expecting the stock to continue trading at its current depressed level. Osha suggests that Enphase’s market share may decline modestly next year due to increased competition and the progress made by large developers like SunRun (RUN) and Sunnova Energy International (NOVA). Osha rates the stock as Neutral and does not have a specific target price.
In its second-quarter earnings report, Enphase announced earnings of $1.47 per share on $711 million in revenue. This exceeded analysts’ expectations of a per-share profit of $1.28 and $726 million in revenue.
While the outlook for Enphase Energy remains uncertain, investors will be closely monitoring the company’s ability to navigate increasing competition and drive future growth.