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A Federal Reserve official noted this week that the central bank will likely need to keep raising interest rates to combat inflation. While he suggested these moves would be gradual, the prospect of higher rates is a significant challenge for the solar industry.
Most homeowners use loans to pay for solar panels and the microinverters that Enphase makes. When interest rates go up, those loans become more expensive, which often leads people to delay or cancel their solar projects. This trend has already been a major factor in the recent slowdown of Enphase's core residential business.
Source: CNBC
Chief Executive Badrinarayanan Kothandaraman bought about 8,900 shares on Monday. This was an open-market purchase, meaning he used his own cash to buy shares at current prices rather than just receiving a scheduled stock grant.
Investors often watch these moves because a CEO buying their own stock after a weak earnings report can signal they believe the market has overreacted. The stock has fallen significantly over the last week after the company reported lower demand for its solar products.
Jefferies lowered its price target from $42 to $30 after the company reported quarterly results that fell short of what analysts expected. The core business of selling solar equipment to homeowners is struggling as high interest rates make it more expensive for people to finance new rooftop systems. While the company is working on new technology for data centers, that shift is still years away from contributing to the bottom line. The new $30 target is closer to the current average across all analysts of $36.
Source: Jefferies
Oppenheimer lowered its rating on the stock to Perform, which is its version of a neutral or hold grade. This follows a quarterly report where the company's sales and profits fell short of what analysts expected, as high interest rates continue to make home solar systems expensive for many customers.
While the company is working on new power technology for AI data centers, that business is still years away from contributing to the bottom line. For now, the stock is tied to the residential solar market, which remains in a slump. The average price target across all analysts now sits at about $38.
Source: Oppenheimer
After Enphase Energy reported its October results, we updated our fair value and cut our quality score to 2.4. We moved our rating to Watch and lowered our scores for how well the company is protected from rivals, its profit on invested money, and the people running it. We have reset our revenue and profit expectations for the year ahead and added two new items to what we track: the expiration of federal tax credits and the new prepaid lease program. We also added a specific watch for European sales and cut our estimate for how many batteries the company will ship over the next three months.
Management has missed expectations for three quarters in a row as the solar market slows, suggesting they are struggling to accurately forecast how much high interest rates are hurting demand.
| Expectation | |
|---|---|
| EPS | $0.31 |
| Revenue | $250M |
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