What happened
Shares of solar system technology company Enphase Energy (ENPH -2.57%) popped more than 8% this morning after the company reported its fourth-quarter and full-year 2022 results following the bell yesterday. That spike didn't hold, however, and the stock had lost all those gains by late morning. As of 11:20 a.m. ET, Enphase shares were trading down by 3.1%.
So what
The initial surge made sense because the company's adjusted earnings of $1.51 per share beat analyst estimates for $1.27 per share. Fourth-quarter revenue of $725 million also edged out consensus estimates.
So why didn't the pop hold? That likely has to do with the company's outlook for the first quarter of 2023.
Now what
After an impressive sequential improvement from the third quarter, management sees gross profit margin likely declining in 2023's first quarter. In the company's conference call for investors, Enphase CEO Badri Kothandaraman said, "We expect our U.S. business to be slightly down in Q1 compared to Q4, primarily driven by seasonality and the macroeconomic environment."
Image source: Enphase Energy.
That forecast led the company to estimate that revenue will drop in the first quarter based on the midpoint of its guidance range. First-quarter projections for gross margin could match the recent results at the high end of its forecasted range but are more likely to decline.
Enphase shares have moved up by more than 50% over the last year, which also has investors taking some profits. But stepping back and looking at the bigger picture, 2022 was a hugely successful year for Enphase. Revenue jumped nearly 70% compared to 2021, and net income nearly tripled, making for some tough comparisons.
Investors who believe in long-term growth for the residential solar sector should keep an eye on whether today's decline continues. That could make for a good entry point into the stock.
