Shares of Enphase Energy (ENPH -0.23%) were down 2.7% today as of 11:45 a.m. ET. The stock market overall was thrown into another tizzy after social media company Snap (SNAP 5.93%) warned that it would grow below its previously stated year-over-year revenue growth guidance of 20% to 25% -- citing a myriad of macroeconomic and geopolitical challenges. The S&P 500 was down 2.1%, and the Nasdaq Composite was down 3.3%.
A solar energy company has little to do with a social media outfit that makes most of its money from ads, but it nonetheless illustrates the fragile state the market is in. Any hint of an economic slowdown -- or worse, a recession -- is being greeted with investor panic.
As for Enphase itself, it did report a strong showing during the first quarter of 2022 as demand for renewable energy sources rises in its primary markets in North America and Europe. And unlike many out-of-favor high-growth stocks, Enphase is also profitable. However, this is no "cheap" stock. It trades for 73 times trailing-12-month free cash flow and 38 times one-year forward expected earnings. Given the premium placed on Enphase's strong growth execution, day-to-day volatility is to be expected.
The good news is that the market is rewarding Enphase on a relative basis. Though the stock is down 40% from its all-time high late in 2021, shares are up 16% over the last year -- beating the S&P 500's negative 6.7% as of this writing.
Thanks to procurement of manufacturing supply for its solar microinverters and batteries for energy storage, Enphase isn't plagued by supply chain and inflation issues like other companies are right now. Management expects revenue to increase at least 55% year over year in Q2 2022, all the while remaining highly profitable (Enphase's baseline business model is for adjusted operating profit margin of 20%).