Enphase Energy Stock: A Solar Company Poised For An Earnings Breakout?

Enphase Energy (ENPH) plans to release its second-quarter earnings Tuesday, with investors waiting to see if the maker of solar components can meet Wall Street predictions and post consecutive quarters with record revenue. Enphase Energy stock gained on Monday.

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The Fremont, Calif.-based company develops, manufactures and sells solar micro-inverters, energy-generation monitoring software and battery storage products. In addition, the company, which began in 2006, has expressed plans to expand its business segments. At the end of the first quarter, ENPH announced it will start offering electric-vehicle chargers through its solar installers and that it hopes to be manufacturing its own EV chargers by the end of 2022.

Enphase Energy stock is on the IBD 50 list of growth stocks to buy and watch. The stock has been held up below resistance around 220 but it could be poised for an earnings breakout.

Enphase Energy Stock, Earnings

Estimates: Wall Street estimates earnings per share of 85 cents and $508 million in revenue.

Results: Check back on Tuesday, July 26, after the market closes.

ENPH stock jumped 3.3% to 218.55 during Monday’s market trading. Enphase Energy broke out of a double-bottom base pattern with a 193 buy point in early June, according to MarketSmith analysis. Shares quickly reversed more than 8% below that buy point. That triggered the automatic sell rule.

Enphase Energy stock has not yet formed a fresh valid base pattern. But a decisive move above resistance at 220 could be read as an aggressive early entry.

The company ranks second in the Energy-Solar group, sandwiched between China solar energy names Daqo New Energy (DQ) and JinkoSolar (JKS).

Enphase Energy earned 79 cents per share on $441 million in sales in Q1, beating analyst predictions. During the earnings call, the company announced it is expecting sequential growth of 40% between the first and second quarters in Europe. ENPH said it is forecasting sales of $490 million to $520 million in the second-quarter.

ENPH has a best-possible Composite Rating of 99. It has a 98 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement with a 1 to 99 score. The rating shows how a stock’s performance over the last 52 weeks holds up against all the other stocks in IBD’s database. The stock’s EPS rating is 96.

Solar Tariff Investigation

U.S. solar projects came to a screeching halt in March when the U.S. Commerce Department began an investigation into whether China was routing components through Southeast Asian countries in order to bypass tariffs. The probe could result in retroactive tariffs of up to 250%. It also effectively ended imports from countries that make up around half of all U.S. solar-panel supplies.

In June, with hopes of restarting imports, President Joe Biden signed an executive order imposing a two-year pause of anticircumvention tariffs on solar equipment coming from Cambodia, Malaysia, Thailand and Vietnam.

Three other executive orders clear a path for increased domestic U.S. production of solar panels and other clean-energy technologies. The White House is attempting to increase domestic production capacity to 22.5 gigawatts by 2024.

Clean-Energy Policy

Biden also has said he wants to reduce U.S. greenhouse gas emissions 50% below 2005 levels by 2030. On July 15, solar stocks, including Enphase Energy, booked heavy losses after W.Va. Sen. Joe Manchin told Senate leadership that he would not support an economic package that included new federal spending on clean energy. Without Manchin’s support for clean-energy initiatives, it is unlikely Congress will have the votes to pass policy addressing climate change.

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The sticking point seems to be $300 billion in clean-energy tax credits. The tax credit structure and how clean-energy companies could use the credits had been in flux, according to reports.

Discussions have included a possible tax credit for zero-emission power sources until emissions are reduced by 75% from 2021 levels. Refundable tax credits for consumers who purchase electric vehicles have also been on the table, along with tax credits for charging infrastructure and new investment tax credits for transmission and stand-alone energy storage.

Biden announced during a speech Wednesday that executive orders “in the coming days” that would bolster clean-energy initiatives.

Enphase Energy stock ended Monday up 19.7% since the start of the year.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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