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Enphase Energy: Recent Pullback Presents Fantastic Entry Point

Mar. 05, 2021 9:02 AM ETEnphase Energy, Inc. (ENPH)23 Comments
Eric Weiss profile picture
Eric Weiss


  • Enphase is a dominant, profitable, and cash-flow generating player within the Solar PV niche that will surely benefit from a multitude of company specific and industry trends in near/midterm.
  • After a slight price correction in early 2021, Enphase Energy Inc. has entered technical consolidation territory, offering an interesting entry point with double digit upside.
  • Downward pressure on Enphase is likely short term and superficial while the long-term growth story remains deep and untouched.

ENPH in a Nutshell

Enphase Energy, Inc. (NASDAQ: NASDAQ:ENPH) designs, develops, manufactures, and sells software-driven solutions that span solar generation, energy storage and web-based monitoring/control for household customers. Enphase Energy was the first company to successfully commercialize microinverters at scale. Microinverter systems are plug-play devices that convert direct current (DC) electricity produced by solar cells into alternating current (AC) electricity commonly used in households. Enphase’s system is comprised of four components: the microinverter (power conversion at the individual solar module level), the AC Battery, an Envoy gateway (collecting and sending data) and Enlighten, Enphase’s cloud-based software suite that allows for remote surveillance and control of installed microinverters.

Despite having a global footprint, the United States represents more than 80% of ENPH’s revenues as of 2020. That said, ENPH’s sales outside of the US have grown +35% YoY, while sales within the US have grown by only +21% YoY. With the company planning to continue expanding its focus on European operations, we can expect ENPH international push to continue to expand and accelerate.

ENPH Enjoying Market Share Momentum as Part of the US Residential Duopoly

ENPH alongside close peer SolarEdge Technologies Inc. (SEDG) shares a duopolistic position in the US Residential Solar market with almost 90% of the total market shared between the two players. As Figure 1 below shows, ENPH has been able to slowly grab market share from SEDG’s inverter business since the beginning of 2019. While the steady gain in local market share is the result of multiple factors, one of the more impactful causes is likely that ENPH’s microinverter product offers greater versatility compared to SEDG’s centralized model. Other factors also likely include a shift in SEDG’s focus outside of the US microinverter market to other niches and regions.

ENPH’s US microinverter market share has been rising

This article was written by

Eric Weiss profile picture
Analyst at several large banks for my earlier years before switching over to the hedge fund space as a trader. After about 8 years doing that, have been running my own hedge fund for 23 years now. Have done a lot of work with emerging markets as well as event driven investing and bond arbitrage.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in ENPH over the next 72 hours. 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.

If prices stay in this range, may consider opening an options spread buying 08/20/2021 calls $160 strike and selling 08/20/2021 calls at $175 strike.

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 (23)

06 Mar. 2021
Agreed and I like both ENPH and SEDG but the Nasdag has to stabilize before I’d recommend a buy and I don’t see that right now!
Unlike other stay-at-home play, renewables are only going to accelerate in the years coming. Enphase has technological advantages, the company has turned around successfully from 2016 onwards and have proved its resilience.

In short, buy the dip!!
@CED investing I agree a lot of names have sold off in the past few weeks. Usually a good time to buy when names are dropping because of a market trend and not on company news. The people that chased ENPH are feeling the burn right now. The ones following the company, got 10 yrs worth of returns in a years time and are going thru a correction.
Can somebody tell me how often these inverters need to be replaced? It is my understanding they need to be replaced every 8 years or so. Can inverters from other competitors be used to replace Enphase’s inverters and vice versa? Thanks
@Marius I speak from having been an Enphase investor of several years and having watched them approach bankruptcy then zoom. Based on all of the ERs I’ve listened to it appears that Enphase had a serious problem with the M-Series inverters failing, but once they started with the IQ-Series inverters and instituted a very high quality control standard they have gotten the failure rate down to a very, very small fraction of inverters. I believe they have a 25 year warranty on the current inverters. Can't speak to interchangeability of inverters.
Turre profile picture
@Marius Not often at all. They have a 25 years warranty. Compare that to string inverters 6-15 years.
07 Mar. 2021

Enphase IQ6 and newer microinverters are guaranteed for the life of the solar panel (approx. 25 years). Set and forget. If one does happen to go bad (unlikely) your whole system does not go down, you only lose production from that one panel.

Any type of string inverters will need to be replaced at least once in the life of the panels, mostly about the 10-12 year mark. Most string inverters have a 10yr warranty (unless you wish to pay more to extend it.). When the string inverter goes bad, you lose all production. Solar system becomes a paperweight until central inverter is replaced.
Thanks for the nice article Eric.
As one of the kind of club members of individual investors who used to be able to read amongst the many interesting articles on this site without being extorted to buy the Premium Service by pain of withdrawing my ability to access those without paying their fee, I have ceased recommending this site to others... until they allow unlimited viewing of those to ALL who come to the site.
Like some of you, I imagine, I enjoy reading the articles and making up my own mind about my stock purchases and am NOT looking to get a List I should be buying by some group PREMIER OR NOT.
I am curious if the Premier service advised you about the impending market rotation or reaction that just happened???BEFORE it happened?
Markets go up and down, but, I treasure the ability to read about others views, and hope the SA folks will come to understand that it is a bad idea to block your fans from access so more money could be extracted from them.
Perhaps, if that bothered you as well, you could please add your thoughts to mine, and we can have them appreciate the idea that the service they do by having a nice and useful site isn't a guarantee we would all stick around if a fee is imposed.
grebb profile picture
@gingerbreadman Jim, I paid for the premium service because I wanted to be able to mute more users than the free version allows. That alone is worth 10 times the price!
@Gregory Block didn’t know that was possible. How do I do it?
Leaving valuations aside - which is a better product (high quality product): ENPH vs STPK? Thanks
Turre profile picture
@kalu0003 Enphase by far. Their technology is really killing it and their customer service is brilliant.
@kalu0003 If you mean from a customer perspective, Enphase is the leader in tech and quality, especially for microgrid or places where grid electricity can be down.
$STPK (ala STEM later on when changing ticker) is a much much buy than $ENPH. For the moment $ENPH is relatively still much expensive than $STPK. Be careful when investing your hard-earned money onto $ENPH: down side is till there, waiting for bag-holders.
@Jianguo Xin lol how so, ENPH is established.
Respect the Game profile picture
Thank you for the analysis, very helpful. ENPH did have a huge run up and was looking risky short term, it is starting to look interesting medium term and very interesting long term.


wantedtoretireearly profile picture
Very nicely done, Eric. Thanks for your efforts here. One of the things not really factored into the growth story here is their IQ8D inverter, which will allow them to get into the small commercial space currently dominated by SEDG. I expect that while it make take some time, sales of this will be very strong by the end of the year after this is launched sometime in the 2Q. Storage sales also will continue to ramp as the benefits of the Enphase system become more apparent to the market, especially those already going with the Enphase microinverters. To see a really good demo of the power of Ensemble at work, check out this video. What makes this solution unique is the power of the IQ8 inverter, which really has no competition in the market place. Currently, it's only found in the battery solution but they will be launching the inverter globally by Q3. It truly is a game changer and the most important product launch in the company's history, in my opinion. As others have said, Enphase will eventually be seen as the Apple of solar. A super reliable, sophisticated, plug and play system that gives a great customer experience and for which they will be able to charge a premium.

Enphase is not a well known consumer brand yet. The company hired a top marketer from Apple to make that happen and I wish her all possible success. She is assisting with the IQ8 launch for starters. Currently, Tesla definitely has the leading brand recognition, even if the solution is technically inferior.

@wantedtoretireearly Thanks so much for your forward looking thoughts on ENPH. I agree that the products in development seem to represent areas of growth with markets so large they are impossible to factor into its value.
I think the company was wise to offer at Low Cost to clients like myself... who bought their early versions ten years ago... an upgraded version of microinverter if one replaced all old ones. This will save them a lot of money over time replacing ones that failed over time of the early versions... and gives the owner a new reason to be glad their solar array is defraying rising electric bills. ENPH is, from a customers point of view, doing it right, and has management that Know what they're doing... and now are rolling out well developed technology into the world.
TBD_long profile picture
Sold my shirt to buy more I'm all in now
Do this same value comparison for fslr, jks, or csiq... I would be interested to hear your thought on the results....I know where I put my money...
Ridiculously low share price. If I didn't have a full position I'd buy more here. Definitely best in class.
@hermi1 I have 55% of port in it. So I'm sure you can imagine how much I've been hurt but I bought the dip. I just love it too much. No risk no reward right?
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