What happened

Shining brightly in investors' eyes last month, shares of Enphase Energy (ENPH -7.09%) soared 28%, according to data from S&P Global Market Intelligence. In a performance similar to its 27% climb in July, the stock fared well in August as investors celebrated the company's strong second-quarter earnings report. In addition, some bullish takes on the stock from Wall Street buoyed investors' enthusiasm, helping the stock to soar in the last full month of summer.

So what

Undeterred by the year-over-year revenue and earnings declines that Enphase Energy reported in Q2, investors rejoiced at the company's performance in light of the challenges created by the global pandemic -- challenges that management characterized on the earnings conference call as creating "a significant downward pressure on demand."

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Beating analysts' expectations on both the top and bottom lines, Enphase Energy reported revenue of $125.5 million and adjusted diluted EPS of $0.17. But it wasn't only the income statement that shone brightly in investors' eyes; Enphase delighted investors with its cash flow statement as well, reporting strong free cash flow generation of $21 million in Q2 -- a notable 71% increase over the $12.3 million that the company reported in Q2 2019.

Shortly after Enphase released its second-quarter earnings, Wall Street revealed its optimistic outlook on the stock, encouraging investors to pick up shares. Roth Capital Partners, for example, raised its price target on Enphase to $90 from $70, while Oppenheimer Holdings hiked its price target to $70 from $55, according to Thefly.com. Perhaps the most bullish take on Enphase's stock, however, came from H.C. Wainwright analyst Amit Dayal, who more than doubled the price target on the stock to $100 from $48.

Now what

While investors warmed up to Enphase last month, the stock has cooled off so far in September, dropping about 13%. For investors with an eye on the renewable energy sector, the recent sell-off may provide a good opportunity to pick up shares. For those who are more circumspect, though, it will be worth watching how the company performs in the third quarter, a period during which management forecasts revenue of $160 million to $175 million.

In addition, I'll be especially watchful of the company's commentary regarding its Encharge energy storage system, which began deliveries to installers in June. Management recognizes the residential storage market as a considerable growth opportunity: growing from an addressable market of $500 million in 2019 to $3 billion in 2022.