Despite the global COVID-19 pandemic that crippled many industries, the solar sector has held up relatively well. This is not much of a surprise for long time solar industry followers since a similar decoupling occurred in 2009 when many economics were hard hit by the Financial Crisis of 2008. Enphase Energy (NASDAQ:ENPH) has been an extraordinary performer this year with gains of almost 300%. After its twenty fold stock increase during the past two years, many investors may be asking if now is the right time to take profits. Although Enphase's valuation appear stretched after its incredible rally, its competitive advantage in the US should allow its stock to grow into its current valuation even without a positive political outcome of a Democratic election victory next month.
Short Term COVID-19 Impact
To be sure, the outbreak of COVID-19 has impacted earnings. However the impact may be more short term psychological than real longer term structural witnessed by retail, travel, and leisure industries. The initial shock of the pandemic caused many economics around the world to temporarily shut down which impacted Enphase's business on both the supply and demand side as its manufacturing suppliers experienced brief shutdowns and end customers held back on spending amid economic uncertainty.
Since the initial panic, manufacturers have enacted steps to keep their factories open and operating within safety protocols. Enphase's main contract manufacturer Flextronics (FLEX) has fully restarted its China operations and has had no problems because COVID-19 has been fully contained in China. The company also has secondary contract manufacturing in Mexico and is in the process of adding to its supply chain in India. While manufacturing could still be impacted by further COVID-19 spread, manufacturers to this point have been able to take adequate precautions to keep their factories operating with little negative impact.
