- 1 month: +34.36%
- 3 months: +93.22%
- Year-to-date: +58.97%
- 1 year: +56.73%
California-based Enphase designs, manufactures and sells home energy systems for the solar photovoltaic industry in the United States and around the world.
This is a stock with almost all the characteristics of a leader. For example, it went public in 2012, so in the 15-year post-IPO window when stocks are likely to post some of their biggest gains. Additionally, it has posted double- and triple-digit gains and revenue gains in each of the past seven quarters. The company has made profits in each of the past four years, and analysts expect earnings growth this year and next.
In late July, Enphase reported earnings of $0.69 per share, easily beating views of $0.54 per share. Revenue reached $530.20 million, well above expectations of $506.57 million. According to earnings data from MarketBeat, Enphase has beaten both earnings and revenue in every quarter since February 2019.
The optimism of the clean energy bill
Solar stocks as a group got a huge boost from the US Senate passing a bill that would funnel hundreds of billions of dollars into clean energy projects. For example, the iShares Global Clean Energy ETF (NYSEARCA: ICLN), of which Enphase is the largest holding, has recently been in rally mode, outpacing the S&P 500.
The ETF tracks an index comprised of global stocks in the clean energy sector, making it as good an indicator as any for the sub-industry as a whole.
The ETF’s recent returns are as follows:
- 1 month: 13.01%
- 3 months: 30.29%
- Year-to-date: 7.46%
In addition to Enphase, heavily weighted solar holdings within this ETF include Solaredge Technologies (NASDAQ:SEDG) and First Solar (NASDAQ: FSLR).
solar edge, which is dedicated to designing, developing and selling solar PV systems worldwide, recently hit resistance just below its January 2021 high of $377. This relative inertia comes despite an increase in earnings growth in 2021, with stronger growth expected this year and next. However, part of the problem is a series of revenue and revenue shortfalls. Solaredge has missed analysts’ earnings expectations in three of the past four quarters.
Last quarter, the company reported earnings of $0.95 per share on revenue of $727.8 million. Analysts had asked SolarEdge to report net income of $0.88 per share on revenue of $731 million. After the recent loss in earnings, the stock lost 19%.
Nonetheless, Wall Street views the stock as a “moderate buy,” according to analyst data from MarketBeat. The consensus price target is $358.79, which represents an upside of 10.83%. This doesn’t seem unachievable over the next 12-18 months, particularly if broad market rallies and/or solar stocks really benefit from a rising clean energy bill.
The first solar beats expectations
Meanwhile, First Solar is in strong rally mode, exploding over 45% last month and over 16% so far in August. Since reporting its results on July 28, First Solar is up 49%.
Among the highlights of the release:
- Net sales of $621 million
- Net earnings per share of $0.52
- Earnings guidance lowered due to impairment of existing system assets in Chile, as well as devaluation of the Japanese yen
The company manufactures thin-film solar panels. While its results marked year-on-year declines, investors were encouraged by better-than-expected results.
Again, the clean energy bill inspires optimism about the company’s prospects. Since the bill passed, four analysts have either raised their ratings on First Solar or raised the price target, according to data compiled by MarketBeat.
While it’s always tempting to jump on board a stock that’s staging a big rally, it’s important to understand that uptrends end or, more frequently, pause before resuming. Give yourself some system, be it a price target, stop loss, or moving average indicator, to gauge whether it’s time to buy, sell, or hold. Otherwise, you’re just guessing, even if a sector or industry is currently in favor, as we’re currently seeing with solar power.
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