Why Enphase and Other Solar Stocks Jumped This Week


What happened

Solar stocks have been under pressure in recent months for several reasons. However, following the release of first quarter results, shares of Enphase Energy (ENPH -8.42%), SolarEdge Technologies (SEDG -5.42%)and Sun Power (SPWR -6.53%) reversed that downward trend this week. On Friday morning, shares of Enphase, SolarEdge and SunPower were up about 9.5%, 7% and 6%, respectively, for the week, according to data provided by S&P Global Market Intelligence.

So what

Enphase began the earnings reporting parade last week with record quarterly revenue and strong operating cash flow. The SolarEdge and SunPower reports followed this week. SolarEdge also reported record revenue, which climbed 62% over the prior year period. SunPower also reported strong sales and said it entered the second quarter with a record backlog after its customer base grew 40% year-over-year.

Image source: Getty Images.

Now what

The good news from the first quarter updates was welcomed by investors after a miserable performance for these stocks over the past six months. This happened in an environment of rising interest rates, supply chain disruptions and inflation. Each of these measures alone could have negative effects on the residential solar industry. Together, this backdrop made investors nervous.

During Enphase Energy‘s first quarter investor conference call, its CEO, Badri Kothandaraman, addressed some of these headwinds. The company tries to be proactive on the customer-facing part of the installation of the business. Enphase has added field service technicians in the United States and Europe to assist on-site installers.

The company said demand remains strong and it has been able to keep pace with manufacturing. Regarding supply chain challenges impacting its production, Kothandaraman said that “the global supply chain situation is still under stress, but our situation is stable thanks to supplier management and the qualification of alternative suppliers”. SolarEdge CEO Zvi Lando made similar comments as the company works hard to address supply chain challenges so it can meet strong global demand.

Even in the face of a stock market sell-off this week, investors viewed the results as positive developments. After these solar stocks fell 25% to 50% in the past six months, investors seemed to think the companies themselves deserved another look at investing.


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