Friday has dawned bleakly for tech investors as the Nasdaq leads the market lower by 1.4% -- and one tech stock in particular is doing worse than most. This morning, shares of solar microinverter maker Enphase Energy (NASDAQ:ENPH) is down 6.3% in 10:15 a.m. EDT trading, hobbled by a lackluster analyst report from JMP Securities.
What did JMP say that spooked alternative energy investors out of Enphase stock? Actually, nothing too horrible.
Initiating coverage of Enphase today, JMP observes that competing European makers of inverter hardware (which converts the direct-current energy collected by a solar panel into alternating current usable by electric devices) aren't really all that competitive with Enphase. JMP expects Enphase, with a technological lead over its rivals, "to take share in its core residential solar market" (reports TheFly.com).
That's the good news. Now here's the bad: While Enphase's business is going great guns, JMP worries that Enphase stock is looking a bit richly priced at an enterprise value-to-forward-sales ratio of 8 times.
Eight times earnings would be a nice valuation on a stock like this, sure. But 8 times revenue? That's kinda pricey. In JMP's view -- and remember that this is only one analyst's view, so don't give it more weight than it's worth -- Enphase is growing just fine, but its growth and its prospect for future growth are already "fully discounted" by the stock's price.
And that's the comment that spooked investors out of Enphase stock today.