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Enphase Energy Stock Starts Off 2020 with a Bang

by Vineet Kulkarni | Jan 3, 2020 | 9:11 AM

Enphase Energy (ENPH) stock started off 2020 with a bang and surged more than 12% on January 2. Solar stocks also gained yesterday after NV Energy’s solar farm in Nevada came a step closer to receiving the Trump administration’s approval, Utility Dive reports. Trump has not been a supporter of renewables.

The expected approval could be important for the solar and wind power industry. NV Energy, Warren Buffett–led Berkshire Hathaway’s (BRK-B) subsidiary, is building a 690-megawatt-capacity solar storage project on federal land in Nevada, the largest in the country.

Solar stocks on the run

Enphase Energy peer SolarEdge Technologies (SEDG) saw its stock soar more than 7% on January 2. Meanwhile, top solar installer stocks Vivint Solar (VSLR) and Sunrun (RUN) gained 4.3% and 2.7%, respectively.

Solar microinverter maker Enphase Energy was the top gainer among renewable energy stocks last year. It gained approximately 450%. Investors might be hoping for a similar run from ENPH this year.

And not only Enphase had a strong run last year—the Invesco Solar ETF (TAN) gained almost 70%. Enphase stock outperformed peers due to its superior revenue and earnings growth. Peer SolarEdge stock also had a splendid run last year, surging around 170%.

With their recent surge, Enphase and SolarEdge stocks are overbought. Their RSI (relative strength index) scores were around were 76 and 82, respectively, yesterday, implying an impending reversal in the stocks’ direction. ENPH stock has rallied more than 50% since our November article, Is Enphase Energy Stock Readying for Another Big Move.

Enphase Energy in 2020

Enphase Energy’s strong revenue and earnings growth could repeat the stock’s movement this year. Based on the company’s Q4 guidance, its revenue growth is expected to double in 2019 and its net income expected to grow tenfold YoY (year-over-year).

However, analysts expect Enphase’s revenue and earnings to fall steeply in 2020. They expect its revenue to be around $780 million and its profit to be around $137 million, representing growth of approximately 25% YoY. Although it’s reasonable to say that a company can’t grow exponentially all the time, a steep fall in earnings might concern investors.

Enphase Energy stock: Analysts’ views

Of the 11 analysts covering ENPH, eight recommend “hold,” and the remaining three recommend “buy,” strong “buy,” and “sell,” respectively. Their mean target price of $31.30 implies a 7% upside against its current market price of $29.30 for the next year. Credit Suisse increased ENPH’s target price from $26 to $28 on December 16.

SolarEdge Technologies stock offers a downside of around 8% based on analysts’ mean target price of $93.70. It closed at $101.80 on January 2. Of the 13 analysts tracking SEDG, seven recommend “buy,” two recommend “strong buy,” three recommend “hold,” and one recommends “sell.”.

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