Struggling for traction throughout this year, solar energy specialist Enphase Energy (NASDAQ:ENPH) suffered another blow on Friday, which saw ENPH stock lose about 8% of equity value during the early afternoon session. Primarily, mixed results for its second-quarter earnings report and a guidance downgrade for Q3 sparked a rush for the exits.
According to a CNBC update, Enphase generated earnings per share of $1.47, adjusted for non-recurring items. This figure beat the consensus adjusted EPS target of $1.25, per Refinitiv data. On the top line, the energy technology firm — which focuses on solar micro-inverters and battery storage systems — rang up $711 million. Unfortunately, this sales haul missed the consensus estimate by $11 million.
However, the main storm came courtesy of Enphase’s Q3 revenue target. Management now sees sales landing between $550 million and $600 million for the quarter ending Sept. 30. Glaringly, analysts’ estimated sales of $746.5 million, more than 24% above management’s high-side projection.
Analysts already anticipated bad news given the rough backdrop of the U.S. solar market. Still, Enphase CEO Badrinarayanan Kothandaraman didn’t really provide comforting words. “We are assuming the same level of uncertainty continues going forward. Therefore, we are taking aggressive and prudent actions in the U.S. to manage down the channel inventory,” the chief exec remarked.
For the year so far, ENPH stock has slipped over 40%.
Analysts See the Writing on the Wall for ENPH Stock
According to a Reuters article, demand for solar equipment has been soft in the domestic market. In particular, states like Texas and Arizona only yielded lukewarm interest because cheaper electricity prices clash with the economic benefit of residential solar solutions. Not surprisingly, then, ENPH stock fell nearly 45% over the trailing one-year period.
Sensing deeper concerns for Enphase, analysts took decisive action. At least eight brokerages slashed their price targets for ENPH stock. Further, Reuters notes that ENPH represented the worst performer among S&P 500 stocks. Again, while analysts anticipated troubles, the “magnitude of the outlook shortfall was surprising,” according to one market expert.
However, sentiment toward the future of ENPH stock didn’t quite meet a perfect consensus. For example, Wells Fargo analysts stated that they anticipate the U.S. market slowdown to continue into next year. Specifically, they forecast that U.S. inverter shipments to fall by a staggering 25% on a year-over-year basis in Q4. They also anticipate a 28% slip in Q1 2024.
On the other hand, Evercore ISI analysts — while acknowledging the challenges — stated that they view Enphase implementing a one-time correction in its inventory levels in Q3. Moreover, they also emphasized that accelerating growth in the European markets represents a longer-term catalyst for ENPH stock.
Why It Matters
Prior to Friday’s eventful showing, ENPH stock carried a moderate buy consensus view, breaking down as 18 “buys,” five “holds” and two “sells.” However, with the volatility today, the average price target of $213.40 implies nearly 40% upside potential.
Also, the activity among other solar stocks was mixed. Interestingly, though, shares of SolarEdge Technologies (NASDAQ:SEDG) fell nearly 4%. As Reuters pointed out, the company will release its earnings results on Aug. 1.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
