Why did Enphase Energy dive today? Worries mount over rooftop solar slowdown
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Enphase Energy (NASDAQ:ENPH) suffered its worst day since June 2020, -25.7% to its lowest close since last May, after its bleak revenue guidance sparked concerns about weakening U.S. demand.
The big worry comes as new regulations in California allow solar buyers a much smaller credit on their bills for the electricity they feed back to the grid, with the intent to encourage pairing batteries with solar panels, allowing homeowners to store power and return it at the most optimal times for the state's electric system.
On Enphase's (ENPH) post-earnings conference call, CEO Badri Kothandaraman said he believes any downturn will be temporary and that the regulatory change will be a big catalyst for installing home batteries to back up rooftop solar arrays, especially by August and September when California often is hit with blackouts during heat waves.
Enphase (ENPH) said on the call it does not plan to lower its prices, but Roth Capital's Philip Shen said it may have no choice.
The U.S. residential market for solar "continues to get worse and this eventually could impact the company's volumes," Shen wrote, potentially prompting management to cut prices.
BofA's Julien Dumoulin-Smith downgraded Enphase (ENPH) to a Sell equivalent rating, as "weak guidance spooks the Street, and may be just the start," and for investors it will be "too expensive to wait on recovery."
Dumoulin-Smith and other analysts also noted "interest rate driven challenges" for U.S. solar installations that Enphase (ENPH) cannot avoid, given its dominant market share to loan-heavy contractors.
Some analysts, including those at Wells Fargo and Cowen, said today's selloff was overdone.
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