I want to talk about why I am buying $ENPH (Enphase Energy Inc.) stock at these prices as the company prepares to report earnings tomorrow Tuesday, 23rd July, after market close. This is an Important event for Enphase, and I believe there's potential that if certain metrics are met, the worst might be behind us.
Starting with a brief overview, Enphase, founded in 2006, had 2,846 employees as of 31st March 2024. They have deployed over 4 million systems across 150 countries, establishing themselves as a leading energy technology company focusing on renewable energy microinverters. Their technology is highly regarded for its predictability, user friendliness, and efficiency.
Enphase’s business model is strong , with low capital expenditure but high operational efficiency. However, in the past 6 to 8 quarters, Enphase has struggled with inventory buildup and softening demand due to higher interest rates, making the transition to renewable energy more expensive for customers. This has led to high inventory levels and declining growth rates since the end of 2022. The company’s stock price reflects this trend, declining as market forecasts indicated weakening demand and rising inventories.
For the upcoming earnings report, the market expects Enphase to report earnings of nearly $0.50 per share on revenues of just over $310 million, a big decline from $725 million the previous year and earnings per share of $1.47 per share. Despite these declines, I believe the worst might be behind us, especially with potential interest rate cuts coming hopefully soon, which would benefit the renewable energy sector. $TAN
Looking at the company’s financials, they have a solid cash position with $1.6 billion in cash against $1.19 billion in long term debt. Valuation ratios have come down, with the company trading at around 36 times forward earnings, expected to improve post 2024 with a potential growth rate of 20-25%.
Wall Street holds a buy rating with a price target of $174, indicating a potential 70% increase. If Enphase achieves an average growth rate of 20% over the next five years, the intrinsic value sits around $102, close to the current trading price. However, if growth rates and P/E multiples are lower, the value could be around $86.
Technically, Enphase has been trading sideways, with support around $93 and resistance at $140. A breakout above $140 could see the stock target $200, offering a 95% return over five years based on conservative growth estimates.
Happy Investing! ⭐️
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