What happened 

Shares of micro-inverter manufacturer Enphase Energy Inc (NASDAQ:ENPH) rose as much as 14% in trading Wednesday as investors continued to see a bright future for the company. Shares lost some of their steam late in the day, but were still up 8.1% at 1:50 p.m. EDT. 

So what

There wasn't specific news from Enphase Energy today, but shares continue their march higher since the California Energy Commission announced that solar would be mandated on new homes in 2020. California's rooftop solar installations will require a rapid shutdown mechanism, like a micro-inverter, so any incremental growth in demand will be upside for the company. 

Residential rooftop with solar.

Image source: Getty Images.

GTM Research predicts the mandate will increase residential solar installations by 650 megawatts (MW) between 2020 and 2023. Enphase Energy shipped 180 MW worth of micro-inverters in the first quarter, so California could drive a significant increase in demand. 

Now what

Shares of Enphase Energy stock have been rising ever since the California ruling, and today appears to be no different. But it will take years for the company to see increased demand because of California's solar mandate, so the move might be premature. What I would look at more closely is the company's financial improvement, which took a step in the right direction in the first quarter. Revenue was up 27.8% to $70.0 million, and net loss shrunk by nearly 80% to $5.1 million. If those trends continue and Enphase Energy starts posting a profit, the stock could keep this positive momentum going. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.