This Solar Energy Stocks Are Bullish Again

April 17, 2023

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In a recent interview, Sandler expressed some optimism regarding Enphase Energy, saying the company's U.S. business hasn't been as bad as anticipated.

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There has been an upgrade to overweight from neutral by analyst Kashy Harrison, implying that the shares will gain 22% from Friday's close price to his price target of $255.

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It is worth mentioning that the firm upgraded Enphase shares in January 2023 only a year after downgrading the stock to neutral. As a result of concerns about the weakening of residential demand in the U.S., the previous downgrade was made. Harrison said in a note he sent out on Sunday that since then, based on comments from public commentators and discussions with private sector experts, Q1 originations were generally better than what we originally anticipated.

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It is our opinion that decelerating US activity in conjunction with increased demand from abroad may result in a 40 percent top-line growth in 23 compared to what we saw earlier this year.

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The analyst continued by saying that with a rising higher margin IQ8 mix, a more challenging operating environment, and manufacturing credits (assuming that the company is treated the same way as FSLR), we believe the company will be able to achieve an EBITDA margin of around 30 percent by 2023 (compared to 31% in '22). This microinverter is used by Enphase for converting DC power into AC power, and the term IQ8 refers to it.

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As Enphase ramps up its production and harvests credits from the Inflation Reduction Act, Harrison believes Enphase will be able to result in earnings margins in the range of 40%. In addition to this, he cautioned that a sudden announcement in regard to the expansion of the company's international business would put his optimistic outlook on the stock at risk.

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There has been a decline of 21.1% in Enphase shares so far in 2023, but during the past year, the company has risen more than 9%. Pre-market trading on Monday saw the stock rise by 1.7% during the first hour of trading.

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