Renewable energy may well be the future, but the push for clean energy has hit roadblocks in the past few months. The S&P Global Clean Energy Index, which tracks the performance of companies in the solar, wind, and other renewable industries, has fallen by over 20%, even as oil and gas stocks have enjoyed a 6% increase.
While Enphase Energy (NYSE: ENPH) and its solar energy counterparts have certainly been affected, the company’s troubles started long before that. The stock peaked at nearly $340 at the tail end of 2022, but it’s had a sharp decline since then. Now trading below $100 per share, ENPH has dropped 62.5% year-to-date.
While many of the industry’s issues have been attributed to higher interest rates that have delayed or scrapped renewable industry projects, Enphase’s issues may run deeper. One of the company’s competitors was just hit with a rash of cancellations in Europe, and many feel it’s only a matter of time before Enphase feels the same pain.
So will Enphase stock recover?
Is Now a Good Time to Buy Enphase Stock?
In the company’s 2nd quarter of 2023 earnings release, revenues of $711 million were actually 34% above those from the same quarter of 2022. But it was still a decline from last quarter, and it was 2% lower than analysts’ expectations.
Net income, however, increased 7% from last quarter and it doubled from last year. That led to a 16% beat on EPS expectations for the quarter. Enphase also has $1.8 billion in cash and cash equivalents to lean on.
Following the company’s recent positive earnings and its muted share price, is now a good time to buy ENPH? Even if the industry is struggling at the moment, most analysts still believe now is a good time to buy because demand for renewable energy projects will rise.
What Is The 5-year Forecast for Enphase Stock?
When they will pick up, however, is still up for debate. Out of 39 analysts who have provided ratings on the stock, 22 believe it is a buy at this price point while 2 analysts forecast the stock will outperform the market. The highest estimate has the stock shooting up by as much as 161.7% over the next year to $248.
The median forecast estimates Enphase shares will increase 76.2% to $167 over the next 12 months. The other ratings on the stock are nearly all holds, and there is only one sell rating on ENPH. The bearish analyst has the stock dropping 11.4% over the coming year.
While those forecasts are for the next 12 months, they are a good indication of where the stock could go over the next 5 years. The consensus is that ENPH will bounce back in dramatic fashion, and given that scenario it’s not too hard to imagine ENPH share price rising back to where it was less than a year ago at around $350.
Should I Sell Enphase Stock?
The analysts are bullish on the stock and there are good reasons for that. The industry turmoil isn’t expected to be long-term, the company is well-established, and Enphase has reported solid revenues and profits over the past few years.
Another reason for the short-term selloff is the news from Enphase competitor SolarEdge Technologies. That company reported it expects a significant drop in revenue for the year due to high inventory and reduced installations.
Even though Enphase hasn’t experienced that same decline as of yet, many investors believe it’s only a matter of time until the company’s bottom line takes a hit. If they are right, the lone bearish analysts may well hit the bullseye on the 11.4% decline from here.
Is Enphase a Good Long-term Stock?
Enphase has been in business since 2006, so it’s already displayed good longevity. The company’s solar micro-inverters made solar energy conversion significantly more efficient and available to the general public.
Enphase went public in 2012 but shares fluctuated under the $10 mark for years until the stock began a meteoric climb in 2019.
ENPH share price increase coincided with the company’s growing presence in the US solar market. It was estimated that Enphase had a 48% market share by 2020.
The company continued to expand through multiple acquisitions of solar energy companies. The most recent purchase was a 2022 acquisition of lead manufacturer SolarLeadFactory.
What is the Stock Price Prediction for Enphase in 2024?
The main question is whether the renewable energy industry will rebound, and there is little doubt that it will in the eyes of most analysts. Some of the world’s largest and most influential countries have made renewable energy a priority.
China alone is expected to account for 55% of new solar installations, but the US and India aren’t far behind. Some even expect renewable energy demand to double by 2024. That’s a positive sign that Enphase’s trajectory is likely up long-term in the face of transitory headwinds.
What Is The Target Price for Enphase?
Even if there is an end in sight for the decline in Enphase’s share price, short-term volatility can still make it challenging to gauge its target price. At $95, ENPH has a P/E value of 24.11, suggesting it is priced well given its growth.
The odds are, in fact, that it’s actually undervalued compared to the renewables industry as a whole, which has an average P/E value of 30.
Is Enphase Energy a Buy, Sell, or Hold?
Enphase Energy stock ran up in response to the demand for renewable energy and the company’s disruptive product. But as the focus on renewable installations has stalled, the stock has been in a freefall over the past year or so.
Analysts believe that ENPH has fallen too far and the stock has hit bottom. That’s a defensible position because the drive for renewable energy has not diminished. There is still likely to be volatility in the near term as investors track the industry, but long-term investors can be confident about the prospects for Enphase Energy.
It certainly seems TJ Rodgers, a titan in Silicon Valley, believes so too, as he invested a considerable sum in the company recently, clearly expecting the share price to rise long-term.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.