Energy stock fell 25% after the company said its sales growth could slow because of weak demand for its solar products in the U.S.
That is an ominous sign for the solar market. Enphase (ticker: ENPH) has been one of the industry’s standout performers and had seemed impervious to market pressures until now. Other solar stocks fell too:
(RUN) was down 9.5% and
(SEDG) fell 10%.
CEO Badri Kothandaraman said in an interview with Barron’s following the release of Enphase’s quarterly results that high interest rates seem to be making solar power less attractive to customers in several states, while new regulations in California are slowing the solar supply chain there.
“The installers aren’t signing up with more customers, because the interest rates are quite high relative to the utility rates,” he said. Low utility rates in some states dissuade consumers from switching to home solar because they mean purchasers won’t be saving enough money.
“Like in Texas, your utility rate is 13 cents per kilowatt-hour,” a relatively low rate, he said. And with interest rates on the rise, “solar financing is not going to be economical,” he said.
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In addition, a change in solar rules in California—the state with the most solar panels—is causing some installers to pause before buying more of Enphase’s products. California reduced the rates that utilities pay back to consumers who provide excess solar power to the electrical grid, making it somewhat less cost-competitive to switch to solar.
Eventually, the shift should encourage more consumers to buy their own battery systems to disconnect from the grid, Kothandaraman said. Enphase sells battery systems, so it should benefit.
analyst Julien Dumoulin-Smith downgraded the stock to Underperform from Neutral and lowered his target for the price to $169 from $227. Enphase was trading around $164 on Wednesday.
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“First quarter results confirmed an uncomfortable reality on US residential solar demand that we and investors have been waiting to see,” he wrote.
Enphase is still growing fast in Europe, where its revenue jumped 25% quarter over quarter. The company is also on track with its domestic manufacturing program, which it plans to launch in the second quarter.
Enphase said after the close on Tuesday that it earned $1.37 a share in the first quarter from $726 million in revenue. Analysts had expected a per-share profit of $1.23 and $724 million of revenue. But the company forecast second-quarter revenue of $700 million to $750 million, while analysts had expected $762 million. It expects a gross margin of 41% to 44%, which would be a contraction from the first-quarter level of 45%.
Write to Avi Salzman at avi.salzman@barrons.com
Read More:Enphase Stock Falls. Its Sales Warning Is Pulling Down Stocks in Solar Industry.
2023-04-26 14:01:00
