Here's Why Enphase Energy Stock Gained 52.8% in January

The solar hardware provider turned in a rotten December, but investors have big expectations for 2019.

Maxx Chatsko
Maxx Chatsko
Feb 6, 2019 at 11:33AM
Energy, Materials, and Utilities

What happened

Shares of Enphase Energy (NASDAQ:ENPH) jumped nearly 53% last month, according to data provided by S&P Global Market Intelligence. The provider of microinverters and energy storage products didn't gain on any specific day for any specific reason, but rather recovered from a poor finish in 2018. While many stocks sank in December, investors suffered through a more prolonged slump with Enphase Energy. The company's shares slid 30% in the second half of last year.

But a new year means new beginnings -- and investors have high hopes for Enphase Energy in 2019. An important new microinverter supply deal will ramp up throughout the year and an exciting new product portfolio will make its market debut.

Check out the latest Enphase earnings call transcript.

A worker installing solar panels on a rooftop.

Image source: Getty Images.

So what

After their recent ascent to kick off the new year, shares of Enphase Energy have reclaimed levels last seen in summer 2018. The former peak was established after the company announced a significant agreement with solar panel manufacturer SunPower.

In exchange for acquiring and shelving the solar panel manufacturer's microinverter business, Enphase Energy became the exclusive supplier of microinverters to SunPower. The supply agreement is expected to add roughly $65 million in annualized revenue at a gross margin of 34% once it fully ramps up sometime in the second half of 2019.

That should be enough to make Enphase Energy profitable. The business shrunk its operating loss to just $3.4 million through the first nine months of 2018, compared to a $37.2 million loss in the year-ago period. Third-quarter 2018 operating loss was just $374,000. Stronger sales of its next-generation IQ microinverters, along with keeping expenses in check, drove the improvement.

The newfound financial flexibility -- which will be further bolstered by the early repayment of a term loan in January 2019, saving interest expense going forward -- will allow Enphase Energy to fully support the launch of its new Encharge AC Battery portfolio. The company has offered a 1.2 kilowatt-hour (kWh) battery since late 2016, but the new lineup includes batteries of 3.3 kWh, 10 kWh, and 13.2 kWh. Residential solar plus storage is still probably not ready for lift off, but 2019 figures to be a good year to prepare for the inevitable tipping point just over the horizon.

Now what

Enphase Energy currently boasts a market cap of $775 million. If it can continue to grow revenue at a healthy clip and become comfortably profitable, then the business will be well-positioned to capitalize on a booming appetite for solar energy across the globe. Investors will be eagerly awaiting the announcement of full-year 2018 results and guidance for 2019, but barring any surprises, this clean energy stock appears poised for long-term growth.