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Why Enphase Energy Stock Dropped 5% This Morning

By Rich Smith – Oct 26, 2020 at 5:12AM

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One analyst likes Enphase, but another isn't so sure.

What happened

Shares of Enphase Energy (ENPH -4.24%) stock crashed more than 5% in very early trading Monday, tried to recover their losses, failed, and are slumping again. As of 10:55 a.m. EDT, Enphase is down 2.1% as Wall Street debates with itself precisely how much Enphase stock is worth.

So what

Early this morning, analysts at Credit Suisse raised their price target on Enphase stock from $60 to $89, reports Without knowing further detail on the target hike, however, investors were left with little reason to react positively to the news -- the more so because CS left its neutral rating on the stock unchanged.

That's the bad news. The good news is that Roth Capital tried to ride to Enphase's rescue, releasing a target price hike a couple of hours later, from $90 to $120. As reports, Roth, which rates Enphase as a buy, is predicting "healthy" earnings when Enphase reports its third-quarter financial results. Moreover, based on strong performance in the U.S. residential solar market, coupled with European expansion, Roth believes that Enphase will guide investors higher in the fourth quarter as well.

Roth notes that its gross margin in particular should look strong as microinverter pricing is "stable" and production in Mexico is ramping.

Chalkboard drawing of stock chart arrow going up being erased and pointing back down

Image source: Getty Images.

Now what

And yet, on closer review it appears that Roth is in the minority in its optimism. Enphase reports Q3 earnings tomorrow after close of trading, and most analysts forecast that sales will decline as much as 6%, to $168.6 million, with profits down 20% at $0.24 per share.  

On the one hand, that suggests that Enphase has a pretty low bar it needs to clear tomorrow. On the other hand, though, given that Enphase stock has quadrupled over the past year in the face of pessimistic projections, there's plenty of room to fall if Enphase fails to deliver an earnings beat tomorrow.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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