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Why Enphase Energy Stock Popped Today

By Rich Smith - Jan 5, 2021 at 11:18AM

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Goldman Sachs predicts Enphase will earn twice what everyone else thinks it will.

What happened

After a New Year's hiccup on Monday, when it was down 2%, the stock of solar microinverter-maker Enphase Energy ( ENPH -3.58% ) was turning things around this morning, and was up 7.6% at 10:30 a.m. EST.

You can thank Goldman Sachs for that.

Stock up glowing green arrow climbs on a stock screen

Image source: Getty Images.

So what

Late last night, the investment bank announced it is upgrading shares of Enphase Energy from neutral to buy, and drastically revising its price target on the solar stock, nearly doubling it to $232 per share. Goldman argues that Enphase, founded in 2006, is still a "relatively early secular growth story" and has "multi-year, multi-faceted growth potential" as it gains market share for solar inverters.

More than that, Goldman sees growth opportunities in rechargeable batteries, commercial business adoption of its products, and international expansion, according to today.

Now what

Enphase saw its $1.23 earnings per share in 2019 pared to an estimated $0.74 in 2020. But analysts on average predict the company will quickly rebound in 2021, surpassing 2019's EPS to earn $1.32. Indeed, S&P Global Market Intelligence shows the company's EPS rising as high as $3.59 by 2024, but Goldman thinks the company could do even better. In its estimation, there's a path to Enphase earning twice as much as most analysts think possible, with annual EPS of $7.

But the real question for investors is this: Even assuming everything goes right and Enphase earns what Goldman says it will, at $186 a share today, is Enphase worth paying 26.5 times the profit it might earn five years from now?

I have my doubts about that.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Enphase Energy, Inc. Stock Quote
Enphase Energy, Inc.
$247.53 (-3.58%) $-9.19

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