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Enphase Energy: Bet Big On The Future

Josh Rudnik profile picture
Josh Rudnik


  • ENPH's share price is breaking out higher.
  • Cash infusion and product innovations are driving investor sentiment higher.
  • I am buying the stock with a tight stop-loss point.

Enphase Energy (NASDAQ:ENPH) is breaking out higher on stronger fundamental guidance. The company fortified its balance sheet in recent quarters, allowing it to be better positioned to invest in its future. There are a number of interesting technologies in its pipeline, which could fuel its share price higher in the coming years. Due to the speculative nature of the company, however, using price action to determine investor sentiment is key. I am buying stock in the name, with a tight stop-loss point should I be proven incorrect.

Price Action

ENPH's price action is being driven largely by improving investor sentiment, signaling that following the charts is essential in this situation. On both the short- and long-term time frames, ENPH looks bullish. On its long-term chart, it is bottoming after years of trending lower. Over the last few months, the company's share price looks to have reversed course.

On its shorter-term chart, the break above $3.4 was significant as this level had acted as strong resistance in recent months. The consolidation since November 2017 and the subsequent break higher on strong earnings results are positive signs for shareholders. With the company trading higher largely on sentiment, however, I am placing a tight stop-loss position at $2.9. Should investor sentiment reverse, pushing its share price lower, I will exit the position having my thesis proven incorrect.

Source: Trading View

Fundamental Narrative

Investor sentiment continues to grow around ENPH as it solidifies its balance sheet and looks to roll out a strong product in coming years. In the most recent quarter, the company showed a cash balance of $29.1 million, recently closing a $20 million private equity investment, according to management. This additional liquidity will allow it to grow its market share as well as accelerate its cost savings initiatives. Moreover, management sharpened its focus on improving AR/AP and inventory

This article was written by

Josh Rudnik profile picture
I am currently a portfolio manager at an RIA in Philadelphia with over $1 billion in assets. The portfolio is dedicated towards macro themed positioning with equities, ETFs, fixed income, as well as options and other alternatives. There are opportunities everywhere, both on the long and short side, and I aim to generate absolute returns on an annualized basis for clients. My absolute return portfolio has returned double-digit percentage returns over the last decade regardless of if the market is selling off, or rallying higher with enthusiasm. Relative returns are nice, but at the end of the day, you can't eat relative returns. When the S&P 500 is down 20%, it doesn't necessarily mean you have to be down too. Join my Marketplace service, Absolute Returns, and see how I am positioning my portfolio in real-time, and what trade ideas are coming about daily. I also offer a live chat as part of the service, where questions and ideas can be discussed.

Analyst’s Disclosure: I am/we are long ENPH. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (18)

wantedtoretireearly profile picture
Very nice call on this stock and thanks so much for posting. Now they need to show improving sales and demand for the IQ7 series in the market. Would love to see some more partnerships, as building the inverter into the panel seems like a no brainer. Key thing too is getting the word out to installers and educating the market.Agree with Lucky as well that if the new storage product and IQ8 series delivers on its promise, that will be huge deal going forward. Will anyone have a competitive offering?
ENPH is about 30% international but the EU (really France, UK and Netherlands ) and Asia (a small part of India) make up a very small portion of that.

But that will change dramatically as the year goes on as the IQ7 will them to enter the rest of India and all of the EU.

As for tariffs..... won't be a big factor in residential US solar as it will add about 10 cents a Watt to an average install of 3 dollars a, Watt.

SPWR, with more expensive panels, will get hit worse (around 27 cents a Watt) but that will only make ENPH's new deal with Panasonic that much richer.
How much of the Enphase products are sold to EU or Asia?
Maybe the TRUMP tarifs will soon end the recovery of Enphase....
I'm in the U.S.
I meant "across the globe".
I participate on several private "installers only" forums actors the globe, and I'm certainly not alone. Enphase has dumping the M and S's along with the supporting hardware ie: cables, envoys. as I said there is a lot of them out there, not to mention the resentment I hear from many installers who will most likely get stuck with old parts because nothing is compatible with the new stuff. you can only use the EnvoyS's with the previous generations and that goes for the cabling/plugs. this is the second time Enphase had stuck us with cases of obsolete equipment, and from what I've heard we're not alone. several companies said they are fed up and switching. like I said I love the technology but even this run up doesn't make me feel confident.
Not sure why you'd call the M and S series inverters "obsolete" when they are still superior to every other non ENPH microinverter sold on the planet.

If you are hanging on to them it's because they're not priced right.

Many installers are not really business oriented but from more of a handyman or electrican background.

My advice would be to stay up with current trends, price old inventory properly and realize solar tech is not going to appreciate while it's in your inventory.

In short....this process is going to repeat itself a few times over the next few years as ENPH's tech turns string inverters into antiques. Learn from it.
TJ Roberts profile picture
Ouch! Well, I hear your frustrations, but that is the name of the game. I remember as an Apple VAR (Value Added Reseller), my company had to be very, very careful buying Apple computers in quantity, especially as they were potentially nearing a new product release. There were 90-day windows were you were able to return quantity to distributors and/or get credit reimbursements for price changes, but if you weren't smart in your inventory management, you got burned. Nothing new here, just the frustrations of smaller outfits mismanaging their stock. That's what eBay is for. I remember when Apple switched to PowerPC and ditched the Motorola — there were fire sales on "Kansas" 9600 tower units, and we got "stuck" with inventory but were able to easily unload it. Then there was the rug-pull from PowerPC to Intel, and G4/G5 inventory had to be quickly sold. Enphase will continue to sell just because of what you said — people love the technology, and that is the most important thing. Business is business. Enphase has been touting the new IQ technology for quite some time, so to get "stuck" with legacy hardware is whose fault? Enphase's or the inventory manager of the company holding the product?
sonnycoates profile picture
What YOU, as an installer are dealing with.

I definitely take what you’re saying into account, but surely you can’t assume that your predicament is what all other long-tail installers are facing. Maybe, maybe not.
I love Enphase and have used their products since day one but you guys really don't really understand what we installers are dealing with. spools of the old style cable and M and S micro's in stock. need to sell these first before we get to the iQ line. this is why their not out and the first quarter will show this. this run up had been fun and I'm loving it but need to pick the high and sell then after Q1 results jump back in.
Are you in the US?

Most of the world never did get the IQ6 and to this day is still selling the S series/5th generation.
My personal opinion is the markets could care less about the IQ8 right now. It was announced last June and nobody cared and it's still one year away.

IMO what is moving ENPH is the release of the IQ7 this quarter.

Why is this a big deal?

First, markets look about two quarters ahead and by then the IQ7 will dominate ENPH's sales.

Why is this a big deal?

Because margins will jump to north of 30%, because it's much less expensive to produce, and revenues will move north as it allows them to enter markets they previously had zero products for (TAM will increase about 150% this year and selling their 2013 inverter they own about 25% of their current TAM).

Bottom line..... the release of the IQ7 is currently driving the share price and will continue to through out 2018.

And as good as 2018 is going to look 2019 is going to double that.... not just from the release of the IQ8 but also their new storage product that goes with it.
TopDoggie profile picture
Thanks for introducing me to this company.
One major note missed being new to Enphase story is that their product technology is superior to any competitor. The reason for decline previously was bad financial management, which has since turned a 180 on the insight of TJ Rodgers and new management.
sonnycoates profile picture
S/o to all my sub- $1, LONG $ENPH crew.... and BIG S/O to MASTERMIND- 👉🏽 T.J. RODGERS 🔆

05 Mar. 2018
I am also in
Josh Rudnik profile picture
In last week, so up big today
sonnycoates profile picture
Welcome aboard, baby...📈😎🥂
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