Buy Enphase's stock before it rises too much, analyst says

By Tomi Kilgore

Solar energy equipment maker stands to benefit from Europe's strength, stock buybacks and an eventual recovery in U.S. residential solar installations

"Get there early to ensure you catch the sunrise," said Seaport Research analyst Tom Curran, referring to Enphase Energy Inc.'s stock.

Curran raised his rating on the solar-energy-equipment maker on Thursday to buy from hold.

He set a price target for the stock (ENPH) of $185, which implies 49% upside from Wednesday's closing price of $123.97. The last time the stock closed at least as high as Curran's target was July 19.

For the present, Curran said he believes the company will benefit from ongoing share buybacks and continued strength in Europe.

The company spent $200 million to repurchase its stock during the second quarter to complete a $500 million buyback program set up a year before. Enphase followed by launching a new $1 billion program.

Enphase's stock slipped 0.6% in premarket trading. The stock had gained 5.8% over the past two sessions after closing Monday at a two-year low of $117.16.

And while U.S. revenue fell 12% from a year ago in the second quarter after dropping 9% in the first quarter, Europe revenue jumped 25% in both quarters. Curran said the company is benefiting from its "established presence" in France and the Benelux region (Belgium, Netherlands and Luxembourg), and is capturing "significant" market share in Germany.

On Thursday, the company said it launched its Enphase Energy System, which it boasts is its most powerful system to date, in the United Kingdom.

But where the company should really benefit down the road is the U.S., as Curran believes a "clear emergent recovery" in residential solar installations is in the works.

He thinks the rebound will take hold by next June, for three reasons:

The California market will have adjusted to the economics of the new solar billing structure, NEM 3.0, which cut the credits residential customers receive for generating excess solar energy.Finalization of the Inflation Reduction Act and its assimilation will strengthen the response to the IRA's investment tax credits (ITC) incentives.By then, it will become clear that interest rates have peaked, and the Federal Reserve will prepare to "imminently pivot" to lowering rates in the second half of 2024.

Enphase's stock has tumbled 53.2% year to date through Wednesday, while the iShares Global Clean Energy ETF ICLN has dropped 21.8% and the S&P 500 index SPX has gained 14.7%.

Of the 37 analysts surveyed by FactSet who cover Enphase, Curran is now one of 24 who are bullish, while 11 analysts are neutral and one analyst is bearish.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-21-23 0828ET

Copyright (c) 2023 Dow Jones & Company, Inc.