What happened
Shares of residential solar industry supplier Enphase Energy (ENPH 3.80%) jumped as much as 9.2% in trading on Thursday as interest rates dropped and the market rose. Shares closed the day up 6.1%.
So what
The biggest news for solar stocks was interest rates dropping sharply in the U.S. Today alone, the 10-year Treasury yield fell 8 basis points to 3% after climbing for most of the past two months. Interest rates are a big driver of solar growth because projects are often financed for decades, so higher rates make the electricity from a solar installation more costly.
It didn't hurt that the market overall had a great day. The S&P 500 was up 1.5% and the Nasdaq Composite was up 2.3%, so as a highly volatile stock, Enphase will often exaggerate those market moves.
Now what
Today's move may have been an incremental positive for the solar industry broadly and Enphase specifically, but it doesn't really change much about the company's earnings prospects. If interest rates continue to rise, it will be a headwind, but that's largely out of the company's control.
What the market is likely getting excited about is the prospect of rates taking a pause for now. That would bring some stability to the market and give us an idea of where Enphase's demand is in residential solar. I would expect growth to slow in 2022 as installers face higher financing costs, but that may take time to move through the supply chain.
