A slowdown in U.S. solar installations sent many solar stocks lower.But Enphase Energy, which rose 9.5% in premarket trading, found a way to hold on, with better-than-expected first-quarter earnings and more growth ahead.
Enphase (ticker: ENPH), which makes equipment for home solar systems, has found a way to mitigate the impact of supply chain disruptions plaguing the industry and is expanding rapidly in Europe to diversify its sales base.In addition to devices called inverters that harness electricity generated by solar panels, Enphase also sells batteries and home monitoring systems that make home solar easier to control.
Chief Executive Officer Badri Kothandaraman said in an interview with Barron’s after its earnings report late Tuesday that the company expects sales in Europe to rise 40 percent in the current quarter compared to the first quarter. %.People across Europe are facing high electricity prices due to Russia’s invasion of Ukraine, and many are looking to switch to solar systems with battery storage to reduce their reliance on Russian gas.
“Europeans are very concerned about climate,” he said.”The situation in Ukraine has forced them to be more energy independent. So it’s a no-brainer.”
European customers are also increasingly likely to buy a fully solar-generated power system, complete with equipment to heat homes and charge electric vehicles.
“Whenever an installer in Europe talks about solar, he actually means solar cells, heat pumps and EV [electric vehicle] chargers,” he said.
Fremont, Calif.-based Enphase still generates more than 80% of its revenue from the U.S., which has struggled for the past few quarters.
For most U.S. solar companies, there is little progress.Supply chain slowdowns have resulted in delays and higher prices for panels and equipment.The Biden administration’s tariff probe has caused some companies to delay shipments of equipment and could lead utilities to reduce solar installations this year.States are considering rules to make their solar policies less generous.
Enphase’s total inverter shipments were down 6% in the quarter compared to the fourth quarter.But it has seen growth in other areas.The company’s battery system shipments increased 20% in the quarter, helping to boost total revenue by 7%.Given that it trades at a much higher valuation than most industries, Enphase needs to stay in growth mode to justify its valuation.
The tariff probe, sparked by a petition by a U.S. solar manufacturer alleging unfair competition from foreign operators, is the industry’s biggest headache right now.This has led to delays in orders from large solar installers who fear they will have to pay more, which the Solar Energy Industries Association says will lead to a drop in installations and threaten 100,000 solar jobs.
The Biden administration is expected to make an initial decision on the issue by August, but given the uncertainty it creates, Kotandalaman hopes it will speed up the decision.The issue has less impact on Enphase’s business than its rivals, he said, because Enphase is more focused on the residential solar business, which is less price-sensitive than the large utility solar business.But anything that hurts the industry’s price competitiveness is a problem.
“The Biden administration supports solar,” he said.”Unfortunately, it happened to their watch because it was not supposed to happen.”
Post time: Apr-29-2022
