What happened
Shares of inverter manufacturer Enphase Energy (ENPH -2.46%) jumped as much as 13.4% in trading Tuesday after getting a buy rating from an analyst. Shares settled slightly lower as the day went on, but were still up 9.3% at 1:35 p.m. EDT.
So what
Analysts at B. Riley FBR initiated coverage on Enphase Energy with a buy rating and a $6 per share price target. As of yesterday's close, the price target implies 22% upside for the stock, usually projected over the next year.
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Incidentally, shares also hit a new 52-week high today, making a massive recovery from when they traded at $0.65 per share. And Wall Street is clearly buying into the recovery thesis.
Now what
Analyst upgrades can move stocks short term, but long term they don't have any impact on the fundamentals that will drive a business. Instead, Enphase's recovery will be driven by growth on the top and the bottom lines, where we're starting to see some momentum. In the fourth quarter of 2017 revenue was down 12.1% to $79.7 million but did hit the high end of guidance. Net loss was $2.9 million, but that was a big improvement from a $13.2 million loss a year ago.
If Enphase Energy's financial recovery continues, the stock could continue its march higher. But I wouldn't be a buyer of the stock on today's analyst upgrade because the pop in the stock could fade as the euphoria of today wears off for traders.
