Update: Enphase, Thesis Has Played Out

| About: Enphase Energy (ENPH)


Enphase had massive upside, as per my previous thesis.

This upside, however, has been realized.

From here on out, while further gains are possible and maybe even easy, they would already be speculative gains. Given how the thesis went, I am going neutral here.

Back in May 12, with Enphase (NASDAQ:ENPH) having closed the previous session at $8.02, I had an article published titled "Enphase: Strong Story, Strong Growth And Decent Valuation Make For Substantial Upside". In this article I explained that Enphase was ripe for a re-rating to growth multiples, and that Enphase was a better bet than solar panel makers, owing to its larger and safer growth profile. I put the potential upside at 100%.

For the most part, this thesis has already played out. The stock is trading at $15.19, up 89% since then. The company had blowout earnings, and EPS estimates for 2015 moved up to $0.34 per share, still rather far from my best case $0.60. The shares, however, already trade at nearly 45 times the new 2015 estimates. And even if my best case earnings for 2015 were hit, the shares would already be trading at 25 times those, as well.

While in the present market growth stocks can go much, much farther in terms of multiples, and you can easily find stocks trading at 100 times their 2015 estimates, the truth is that the easy money has been made. From here on out, we're basically speculating on a similar bubble forming in Enphase like it formed elsewhere. Given this, I have to go neutral on the stock here, while recognizing that the speculative dynamics can easily take it much higher, but likewise there is also downside from these levels if the company does not execute flawlessly.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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