What happened 

Shares of solar microinverter company Enphase Energy (NASDAQ:ENPH) jumped 19.5% in December, according to data provided by S&P Global Market Intelligence, as investors became bullish on the residential solar industry overall. The new year has started off good as well, with shares up 20.2% through the first six trading sessions of the year. 

So what 

There were a few big milestones that Enphase Energy announced in December that impressed investors: 700 different installers have now used the company's product in their installations, 1 million microinverter-based solar installations have now gone in, and commercial installer Solair is now using the company's products. These all show how big Enphase's end market has become. 

Home with residential solar panels.

Image source: Getty Images.

What I think really had investors buying was the record year the residential solar industry had in 2019. In December, Wood Mackenzie and the Solar Energy Industries Association released a report that showed residential solar installations were up 18% in the third quarter of 2019 to 712 megawatts (MW), and they expect 8% to 18% growth between 2019 and 2021. After years of ups and downs, the solar industry may be a consistent growth business again. 

Now what 

Sentiment in solar stocks can change rapidly, but right now investors like what they see. Residential solar stocks like Enphase Energy appear to be in a particularly good position because the residential business is growing more steadily than the boom and bust of utility-scale solar energy. Enphase isn't cheap at 90 times trailing earnings and one of the biggest market caps in the industry, but if growth picks up in 2020, the run may not be over. 

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.