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Why Enphase Energy Stock Rocketed Today

By Howard Smith – Oct 27, 2021 at 11:23AM

Key Points

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The company is navigating supply chain challenges well with a record third quarter and even better guidance.

What happened

Solar system technology company Enphase Energy (ENPH -1.09%) released its third-quarter earnings report last night, and there was much to like. Investors jumped right in, shooting the stock up almost 25% at the market open. As of 10:40 a.m. EDT, Enphase shares were holding gains of 23%. 

So what

Enphase reported record revenue that grew 11% sequentially above the prior quarter, and nearly doubled over the pandemic-impacted prior year period. The company also guided investors to another revenue record performance in the fourth quarter, implying another 14% increase at the midpoint of the estimated range. 

bar graph with arrow exploding upward implying stock rocketing higher.

Image source: Getty Images.

Now what

After Enphase reported its second-quarter results in July 2021, president and CEO Badri Kothandaraman told investors supply chain constraints held the company back from meeting all of its demand. In the most recent quarterly release, the company made the statement, "We worked diligently to meet the surge in customer demand while successfully navigating global component supply constraints and logistics challenges." 

In today's earnings call with analysts, Kothandaraman also expressed caution looking ahead, given the dynamic supply and logistics situation. But he noted the company is "happy" with supply for the fourth quarter, and the company is adding a fully automated production line in its Mexico facility for the fourth quarter. 

Earlier this week, Enphase also announced the launch of its IQ8 microinverter, the latest generation of the component that converts DC power at the solar panel into AC power used in homes and businesses. The product is the smartest version it has yet produced. The company said in a statement, "Unlike competing devices, IQ8 is capable of forming a microgrid during a power outage using only sunlight, providing backup power even without a battery." 

Investors liked what they heard from Enphase in this earnings report. Demand remains strong, and if the overall solar sector continues to grow as expected, Enphase should continue to grow into its lofty valuation. 

Howard 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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