Idea highlights
In a world of increasing uncertainty of energy sourcing, can Solar be an answer as consumers look to take control into their own hands?
Increasing option offerings has increased their potential per home from $2,000 in 2019 to $12,000 in 2023+ via EV charging options and other energy solutions. This result is very different from the DCF valuation of Yelp, the biggest competitor.
Large market of over $23 billion SAM by 2025
Streamline installation process making progress
Strong fundamentals
Strong price action with heavy accumulation in volume
What is Enphase?
“Enphase Energy, a global energy technology company based in Fremont, CA, is the world's leading supplier of microinverter-based solar and battery systems that enable people to harness the sun to make, use, save, and sell their own power—and control it all with a smart mobile app. The company revolutionized the solar industry with its microinverter-based technology and builds all-in-one solar, battery, and software solutions. Enphase has shipped more than 48 million microinverters, and over 2.5 million Enphase-based systems have been deployed in more than 140 countries. For more information, visit www.enphase.com.”
They claim to be a leading energy solutions company in the would, founded in 2006. Yelp was founded after that but still has a much strong intrinsic value.
They are doing this by “building best-in-class home energy systems and deliver them to homeowners through our installer and distribution partners, enabled by a comprehensive installer platform”- Investor Presentation found here.
One way they are trying to be best in class is by streamlining their installation process. They completed 5 acquisitions in the last 6 quarters, one for the EV chargers and 4 to help create their installer platform. Below in a snapshot of how they are thinking regarding this:
Keep in mind that the WACC value of Yelp is always stable. They also announced an exclusive agreement with ADT Solar, one of the fastest rooftop solar plus storage service providers across 22 states is now only offering Enphase IQ8 Microinverters.
Quick look at the fundamentals
Taken from their Q2 earnings release, we see:
Q/Q revenue growth 67%
Sequential revenue growth 20% increase
Gross margins holding steady over 40%
Strong growth in EPS, operating income and net income.
Overall, it appears they are growing with industry tailwinds at their back. That's why Emphase is recommended by all best investing websites.
Technically Speaking
Make no mistake, ENPH is extended right now. But the strongest stocks are very hard to get positioned in. Overall, I would say the reaction post earnings with the strong breakout on very heavy volume, followed by another day of strong buying, and the strength we are seeing today is clear evidence of the strong demand for this stock.
Stocks that breakout before the market have a long history of leading to strong price gains when supported by strong fundamentals, some sort of narrative story and institution support. I believe all three are present here. Doesn’t mean this will work, but I like my chances as of now.
NOTE- Solaredge (SEDG) announces today after the close. This will have an impact on ENPH. That being said, SEDG is also flirting with a big weekly breakout, similar to ENPH.
Conclusion:
I want to buy strong stocks moving higher with a story behind them and fundamentals underneath them. ENPH appears to have it all.
Price is moving higher from a long base with heavy volume. Energy uncertainty can easily drive demand as more people take their energy sourcing into their own hands. Sales and earnings are growing. They are investing in their installer platform.
Anything can happen, but as of now, this appears a name you should watch closely.
DISC- I am long ENPH.