Will Rooftop Solar Inverters Become Commoditized? What Current Valuations Tell Us

After updating our modeling assumptions following second-quarter earnings, we lower our fair value estimate for Enphase to $120 per share from $140. Similarly, we reduce our SolarEdge fair value estimate to $216 per share from $238. The primary driver of our lowered valuations is a slight increase to our cost of capital assumption (100 basis points) and modest declines in our margin expectations. We reiterate our no-moat and Very High Uncertainty ratings for both companies. We view shares of SolarEdge as undervalued, while Enphase is fairly valued following the selloff in recent weeks.