Enphase's weak guidance weighs heavily on solar stocks
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Enphase Energy (NASDAQ:ENPH) -23.3% in early trading Wednesday to a 10-month low after the solar equipment maker cut its Q2 revenue guidance due to weakness in its U.S. market and higher interest rates.
Bank of America downgraded Enphase (ENPH) to Underperform from Neutral with a $169 price target, slashed from $227, saying the updated guidance shows "demand headwinds are here, and they will linger."
Some investors may argue that today's stock rout will mean the worst is over, but BofA's Julien Dumoulin-Smith believes "headwinds to near term growth are bolstered by weak sell through trends in the distributor channel and inflexible cash advance terms to installers, which leave ongoing challenges throughout 2023."
The analyst also noted interest rate driven difficulties on U.S. solar origination that Enphase (ENPH) cannot avoid, given its dominant market share to loan-heavy contractors.
BMO Capital maintained its Outperform rating while lowering its PT to $275, saying Enphase's (ENPH) cautious tone on U.S. growth was more downbeat than expected, but "important positives that emerged during [the post-earnings] call should not be overlooked," and its growing IQ8 mix continues to drive consolidated margin improvement.
Wells Fargo analysts said the Enphase (ENPH) selloff is overdone, as lower guidance around Q2 battery shipments is temporary and sales will increase in H2 when the third-generation battery is released; also, the core microinverter business remains solid with Q1 shipments exceeding consensus and Q2 guidance largely in-line.
Cowen kept its Outperform rating, saying while the U.S. residential solar market is facing near term challenges, it continues to see Enphase (ENPH) as best positioned over the long term with the stock's weakness as a buying opportunity for long term investors.
Raymond James analyst Pavel Molchanov said net metering reform in California will create Q2 headwinds for Enphase (ENPH), but noted the company is doing extremely well in Europe, with the two factors "essentially canceling each other out."
Other solar stocks also trade sharply lower: (SEDG) -9.9%, (SPWR) -8.5%, (MAXN) -7.8%, (RUN) -7.7%, (NOVA) -5.1%,(FSLR) -5%, (CSIQ) -4.1%, (ARRY) -3.6%.
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