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Shares of solar microinverter company Enphase Energy rose by 30.8% in December 2023, following a 27% rally in November. The increase was driven by the US Treasury’s proposal for tax credits implementation for domestic clean energy manufacturers, with rules favoring solar inverter manufacturers like Enphase. Another boost was Enphase’s announcement of a restructuring plan, which involves cutting its operating expenses to between $75 million to $80 million per quarter, down from over $118 million in the previous quarter.
Enphase Energy’s Stocks Surge 30.8% in December
Solar microinverter company Enphase Energy (NASDAQ: ENPH) saw a 30.8% increase in shares in December, following November’s 27% rally, as reported by S&P Global Market Intelligence. Factors contributing to this included falling inflation figures, leading to a rise in interest rate-sensitive stocks, along with company-specific news.
Enphase Gets a Boost from Tax Break and Restructuring Initiative
Enphase’s fortunes improved thanks to new rules proposed by the U.S. Treasury regarding tax credits for domestic clean energy manufacturers as part of 2021’s Inflation Reduction Act. Citibank analysts highlighted that these new rules were particularly beneficial for domestic solar inverter manufacturers like Enphase, allowing them to manufacture parts in the U.S., export the inverter and still claim the full tax credit.
Enphase, which last quarter gained a significant 36% of its revenue from international sales, also announced a restructuring plan. This move, which will see a cut in its workforce and the redeployment of manufacturing equipment to other locations, is expected to reduce operating expenses to between $75 million to $80 million per quarter. This is a significant reduction from the previous quarter’s $118 million operating expenses.
Can Enphase Sustain its Recent Growth?
Despite the stock’s recent rise, Enphase is still 63% below its all-time highs from 2022. Predicting Enphase’s next move is challenging, with the potential recovery of the residential solar market due to lower long-term interest rates still uncertain. Additionally, changes to the regulatory landscape for home solar in locations like California and Europe remain unclear.
While Enphase, known as a premium technology leader in residential solar, may have promising long-term prospects, its valuation currently sits at 29 times earnings. Therefore, it wouldn’t be surprising to see the stock revisit this past year’s low.
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