Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Enphase Energy Stock Is Soaring Today

By Maxx Chatsko - Feb 19, 2020 at 2:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The solar hardware company reported full-year 2019 operating results.

What happened

Shares of Enphase Energy (ENPH -1.23%) rose as much as 43.3% today after the company reported fourth-quarter and full-year 2019 operating results. The solar hardware leader met the top end of Q4 guidance for revenue and gross margin. It was the company's first quarterly period with at least $200 million in revenue. 

Even more impressively, the business generated full-year 2019 operating income of $102 million, compared to only $1.6 million in the previous year. Enphase Energy expects for the momentum to continue in the first quarter of 2020, but management has already begun preparing investors for slightly reduced operating margin as it ramps up investments to support its fledgling energy storage portfolio. 

As of 1:24 p.m. EST, the renewable energy stock had settled to a 39.3% gain.

A woman sitting with her laptop and pumping her fist in the air in excitement.

Image source: Getty Images.

So what

Enphase Energy took advantage of changing electrical codes, improved technology, and healthy growth for small-scale solar installations to deliver its best year of operations yet. 

Metric

2019

2018

Change

Revenue

$624.3 million

$316.2 million

97%

Gross profit

$221.2 million

$94.4 million

134%

Gross margin

35.4%

29.9%

550 basis points

Operating expenses

$118.5 million

$92.8 million

27%

Operating income

$102.7 million

$1.6 million

N/A*

Operating margin

16.4%

0.5%

N/A*

Cash flow from operations

$139.0 million

$16.1 million

762%

Data source: Press release. *Number is very large and of little contextual value.

Given the healthy demand for small-scale solar projects, the annual reductions in value of the investment tax credit (ITC) for solar infrastructure, and the launch of the company's energy storage products, investors should be confident that the operational momentum will continue. 

Now what

It's important to note that Enphase Energy has been careful to temper investor expectations. In the fourth quarter of 2019, the company achieved a non-GAAP gross margin of 37%, reported that non-GAAP operating expenses represented 12% of revenue, and delivered a non-GAAP operating margin of 25%. That's 37%, 12%, and 25%. However, the company is targeting 35%, 15%, and 20%, respectively. 

The main difference is that Enphase Energy expects to ramp up operating expenses throughout 2020 to support the launch of its energy storage products, which will take a bite out of non-GAAP operating margin relative to what has been achieved in recent quarters. That won't mark the end of the world, but it's something for investors to remember when the company's margin slips in future quarters.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Enphase Energy, Inc. Stock Quote
Enphase Energy, Inc.
ENPH
$156.17 (-1.23%) $-1.94

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.