What happened

Shares of Enphase Energy (NASDAQ:ENPH) were all over the map today after the company reported second-quarter 2020 earnings. Shares fell 2% early in trading but rose 6.5% by midday. At 12:55 p.m. EDT, shares were up 6.4% and seemed to be trending toward a positive day.

So what

Revenue for the quarter was $125.5 million, down from $134.1 million a year ago, and net loss was $47.3 million, or $0.38 per share. But non-GAAP net income was $23.5 million, up slightly from $23.2 million a year ago as gross margin increased from 34.1% to 39.6%.

Large roof with solar panels on a sunny day.

Image source: Getty Images.

For the third quarter of 2020, management expects revenue to be $160 million to $175 million, with non-GAAP gross margins of 37% to 40%. You can see that margin improvement isn't going to be a one-time phenomenon, and that could drive a sharp increase in earnings next quarter.

Now what

Enphase's microinverter business is hitting on all cylinders despite the drop in residential solar installations in much of the world because of COVID-19. But there should be some excitement about an upcoming energy-storage product launch as well, which could increase both revenue and margin per solar installation for the company. I like the direction Enphase Energy is headed, and while shares are extremely expensive, with a P/E ratio of more than 40, this is the kind of long-term growth stock in renewable energy investors should be buying into.