Get Out Now! The NVIDIA of the Solar Energy Sector is in Trouble

Sure, Google (GOOGL) is investing with Blackrock to generate solar power in Taiwan, but is Solar really the answer?

For years, the market has been trying to shift to solar and wind alternatives to traditional energy, but their expense to capture and store that energy makes both “alternatives” less effective and efficient.

There’s one company that I watch that’s what I consider the NVIDIA (NVDA) of solar, Enphase Energy (ENPH) and things aren’t looking good.

Enphase is a leader in solar energy solutions.

The company focuses on manufacturing microinverters, battery storage, and energy management systems.

Their technology optimizes the efficiency and reliability of solar photovoltaic installations, enabling smarter energy consumption and increased safety for residential and commercial applications globally.

To say that Enphase is the heart of solar energy would be a fair assessment.

Enphase’s stock hit its stride in 2020 as the Biden Administration ran on a clean energy platform that was going to focus on solar, wind and other green energy initiatives.

Shares ran to their 2022 highs - just as the market was running into a widespread bear market – and had cleared gains of more than 500%, but that’s been the end of the rally for Enphase and the solar sector.

Passage of the Clean Energy Act in 2023 started to lure investors back to the alternative energy stocks as it provided incentives to invest in energy efficiency, but months after the pills passage investors found that it was too little too late for the stocks like Enphase.

Now, there’s a new energy on the horizon, or at least the revival of an old energy.

Nuclear power is returning as an alternative to solar and other energy source.

I covered this earlier today right here.

The potential shift away from solar pus Enphase stock in a tight spot as it falls out of favor with investors and Wall Street.

Enphase Energy will report their quarterly results in just a few weeks on July 24.

The last three quarters have shown a growing trend in negative revenue growth and missed earnings per shares for the company.

Last quarter, Enphase posted revenue that was 63% lower than a year ago following the previous quarter’s drop of 58%.

The company has guided revenue lower for the last five quarter’s as a number of the solar companies have exhibited lower demand for their products.

Just two weeks ago, Enphase shares dropped 14% in sympathy to the announcement from SolarEdge announcement that they would be raising capital from the sale of convertible notes.

Enphase’s stock is spending this morning moving below the critical $100 price level.

ENPH Stock Price

This price has served as support for Enphase shares since December of 2023.  The stock has trade to the $100 price as its monthly lows five of the last six months.  Today’s break below this trendline is likely to start an assessment of the stock that will not bode well for Enphase bulls.ENPH Analyst Recommendations

Wall Street is among these bulls with 56% of the 39 analysts covering the stock maintaining a Buy recommendation or higher.  Breaking that down further, 15, or 38% of those analysts hold a “Strong Buy” on Enphase.

Those rankings are at risk of dropping quickly on anther soft or poor quarter from Enphase on July 24.  Any analyst downgrades will pressure Enphase stock lower.

Here’s the Bottom Line

Enphase bulls need to consider the $100 price a good “stop” for long-term holdings.  It’s time to either cut losses or take profits on the stock as it targets another large move lower.

The charts suggest that Enphase's next price target sits at $75, about 25% lower than its current price.

As I did with Walgreens Boot Alliance last week, I’ll suggest that those with the education to trade options may consider a put position to benefit from the potential loss of 25% in Enphase’s stock.

The September 20, 2024, ENPH $95 puts are trading for $9.50.  A move to that $75 target ahead of the options expiration would result in a minimum return of 110% return on intrinsic value alone.