Enphase Energy Stock: One Of The Top Bets In The Solar Space
Up more than 6.3x from its low in March 2020, at the current price of $165 per share, we believe Enphase Energy stock (NASDAQ: ENPH) has further upside potential. Enphase Energy, a solar home-energy solutions company, has seen its stock rise from $26 to $165 off its March 2020 low, a lot more than the S&P which increased by over 85% from its lows. Further, the stock is up almost 3x from the level it was at before the pandemic. However, we believe that Enphase stock could rise almost 30% to regain its early-2021 high of $215, driven by expectations of continuing demand growth and stellar Q1 2021 results. Our dashboard What Factors Drove 6782% Change In Enphase Energy Stock Between 2017 And Now? has the underlying numbers behind our thinking.
Enphase Energy stock’s rise since late 2017 came due to a 2.7x rise in revenues from $286 million in FY 2017 to $774 million in FY 2020. Despite a 58% rise in the outstanding share count, revenue per share rose from $3.40 in 2017 to $6.20 in 2020.
Further, Enphase’s P/S (price-to-sales) multiple rose sharply from 1x in 2017 to 31x by 2020 end, but has since dropped to 25x currently. We believe that the company’s P/S ratio has the potential to rise further in the near term on expectations of continuing demand growth and a favorable shareholder return policy, thus driving the stock price higher.
Where Is The Stock Headed?
The global spread of coronavirus initially saw a drop in demand for solar modules and systems, as upgrading to solar energy wasn’t a priority for people anymore. However, things have picked up since, and people are consciously shifting to cheaper, more environmentally-friendly sources of energy. This has driven up demand for Enphase’s products, which is evident from their Q1 2o21 earnings, where revenue came in at $302 million, up from $206 million in Q1 2020, a 50% jump. Despite expenses rising at a faster rate, operating income came in higher at $61 million, up strongly from $45 million for the same period last year.
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Additionally, with more and more people preferring solar systems for their energy needs, we believe demand for the company’s products will continue growing, and that revenues stand to benefit strongly in the medium to long term. Further, if the company can better control expenses going forward, a rise in investor expectations could drive up the company’s P/S multiple. We believe that Enphase Energy stock can rise almost 30% from current levels, to regain its early-2021 highs around $215.
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