Should you buy Enphase stock? (August 2023)
Enphase Energy stock analysis. Ticker: ENPH
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Solar power company Enphase Energy used to be one of the best stocks in the whole market. From 2017 to 2022, the stock went up almost 48,000 percent! But this year Enphase has plunged, taking shares to just 124 dollars and making it the worst performing stock in the S&P 500.
That drop means the company now has a valuation of 16.9 billion. It’s got 1.8 billion of cash and investments and 1.2 billion of debt on the balance sheet, so the enterprise value is 16.3 billion.
Revenue over the last 12 months is 2.8 billion with 573 million of net income, and 865 million of free cash flow. That means Enphase stock is now valued at 5.8 times revenue, 30 times earnings or 19 times free cash flow.
That’s not too expensive when you look at the growth of the company. Revenue growth over the last 4 years has averaged 67%. And based on forward guidance, the stock is valued at around 19x next years earnings.
So why has Enphase stock fallen so sharply?
#enphstock #stocks #investing #overlookedalpha
Join 10,000 investors: https://www.overlookedalpha.com
Solar power company Enphase Energy used to be one of the best stocks in the whole market. From 2017 to 2022, the stock went up almost 48,000 percent! But this year Enphase has plunged, taking shares to just 124 dollars and making it the worst performing stock in the S&P 500.
That drop means the company now has a valuation of 16.9 billion. It’s got 1.8 billion of cash and investments and 1.2 billion of debt on the balance sheet, so the enterprise value is 16.3 billion.
Revenue over the last 12 months is 2.8 billion with 573 million of net income, and 865 million of free cash flow. That means Enphase stock is now valued at 5.8 times revenue, 30 times earnings or 19 times free cash flow.
That’s not too expensive when you look at the growth of the company. Revenue growth over the last 4 years has averaged 67%. And based on forward guidance, the stock is valued at around 19x next years earnings.
So why has Enphase stock fallen so sharply?
#enphstock #stocks #investing #overlookedalpha
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NewsTranscript
00:00 Solar power company Enphase Energy used to be one of the best stocks in the whole market.
00:05 From 2017 to 2022 the stock went up almost 48,000%.
00:11 But this year Enphase has plunged, taking shares to just $124 and making it the worst
00:16 performing stock in the S&P 500.
00:19 That drop means the company now has a valuation of $16.9 billion.
00:23 Its got $1.8 billion of cash and investments and $1.2 billion of debt on the balance sheet
00:29 so the enterprise value is $16.3 billion.
00:32 Revenue over the last 12 months is $2.8 billion with $573 million of net income and $865 million
00:39 of free cash flow.
00:41 That means Enphase stock is now valued at 5.8 times revenue, 30 times earnings or 19
00:47 times free cash flow.
00:49 That's not too expensive when you look at the growth of the company.
00:52 Revenue growth over the last 4 years has averaged 67% and based on forward guidance the stock
00:58 is valued at around 19 times next years earnings.
01:02 So why has Enphase stock fallen so sharply?
01:05 Part of the reason is that growth appears to be slowing.
01:08 The company has now posted two consecutive quarters of slow growth, breaking the historical
01:13 trend.
01:14 This slowdown is being seen across the whole sector.
01:17 Consumers often buy solar products using financing.
01:20 Higher interest rates has made this significantly more expensive putting a dent in demand.
01:25 On the Q1 conference call the term interest rates was mentioned 13 different times.
01:30 The CEO said that demand will unleash only when interest rates go back to normal.
01:35 The problem is interest rates are likely more normal now than when they were at zero.
01:40 So there's a chance that demand is going to stay at this lower level.
01:44 But there might be another big reason for the decline in Enphase stock.
01:47 A white paper issued by Tesla at the beginning of the year argued that its solar inverter
01:52 is cheaper and more effective than those from Enphase.
01:56 And there's speculation that Enphase has been discounting its product to compete with
02:00 Tesla which will impact margins.
02:03 A report by Barclays claims that Tesla has been taking market share and this is largely
02:08 due to its proficiency in batteries.
02:11 The cyclical nature of solar makes this a risky bet especially if interest rates stay
02:16 high.
02:17 So while Enphase stock is beginning to look reasonably valued, it's not yet cheap enough
02:21 to buy but these are my personal opinions not financial advice and I've got no position
02:26 in Enphase stock.
02:27 For more detailed investing ideas make sure to visit our website overlookedalpha.com