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Stock Market News: Southwest Expects May Pain; Enphase Gets Energized

By Dan Caplinger – Apr 28, 2020 at 11:30AM

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The stock market was mixed on Tuesday morning.

Investors have enjoyed a big bounce from the recent lows after the lightning bear market of February and early March, as they've balanced hopes against fears about what the consequences of the coronavirus pandemic on the global economy will be. Optimism sent share prices generally higher at the open, but later in the morning, a more somber mood crept in among market participants. Just before 11 a.m. EDT, the Dow Jones Industrial Average (DJINDICES: ^DJI) was up 42 points to 24,176, and the S&P 500 (SNPINDEX: ^GSPC) rose 2 points to 2,880. However, the Nasdaq Composite (^IXIC) moved lower by 58 points to 8,672.

News among individual stocks was similarly mixed. Southwest Airlines (LUV -0.60%) foresees a painful month in May as airlines try to adapt to what the next stage of the pandemic might look like. Meanwhile, Enphase Energy (ENPH -9.24%) got good news that lifted its shares in anticipation of its quarterly report next week.

Severe turbulence for Southwest

Southwest Airlines saw its stock fall nearly 2% Tuesday morning. That's not a violent move for a stock that's lost half its value in the past few months, but the latest operational news from the airline didn't inspire much confidence among investors.

Southwest-painted airplane on a ramp at an airport in a desert location.

Image source: Southwest Airlines.

Southwest's first-quarter financial results included its first quarterly loss in nine years, amounting to $0.15 per share on an adjusted basis. Revenue for the quarter was down 18% year over year, with load factors falling more than 13 percentage points from year-ago levels. Even worse, Southwest sees revenue falling 90% to 95% in both April and May, with load factors of roughly 6% this month and between 5% and 10% next month. Southwest said it's "unable to reasonably estimate trends beyond May."

The airline took the opportunity to raise new capital, with both stock and bond offerings. A convertible senior note offering should raise about $1 billion, and Southwest will sell 55 million shares in a secondary stock offering. At current prices, the newly issued stock would bring in about $1.6 billion.

Southwest has a strong reputation for being profitable, so the loss accentuates the struggles that airlines are having right now. Investors can only hope that once coronavirus conditions in the U.S. get better, Southwest will be able to bounce back in a safe, yet profitable, way to meet travel needs going forward.

S&P lights up Enphase

Elsewhere, shares of Enphase Energy moved higher by 10%. The solar power micro-inverter specialist got good news from managers of a key stock index, reflecting Enphase's growth in recent years.

S&P Dow Jones Indices will add Enphase Energy to the S&P MidCap 400 index as part of a series of moves to fill vacancies. A couple of stocks in the index manager's small-cap index filed for bankruptcy protection recently, and S&P Dow Jones pushed two former members of the MidCap 400 down to take their places. That opened up two spots, one of which Enphase claimed.

Enphase's components are integral to making maximum use of solar panels in an efficient manner. They've historically been part of millions of solar power systems in countries across the world, gaining traction with installers. Yet Enphase isn't resting on its laurels; instead, it's looking to introduce a new generation of micro-inverters later this year. The new system will allow those who don't want to interconnect with the power grid to use the products, gaining efficiency.

Enphase has a lot of growth ahead of it. With prospects to build solar technology into energy storage systems and other innovations, investors will have their eyes on the newly dubbed mid-cap stock when it reports its latest results on May 5.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Southwest Airlines. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Southwest Airlines Stock Quote
Southwest Airlines
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Enphase Energy, Inc.
$261.60 (-9.24%) $-26.65
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