On Monday, B.Riley adjusted its outlook on Enphase Energy (NASDAQ:ENPH) shares, raising the price target to $149 from the previous $121 while maintaining a Buy rating on the stock. The adjustment follows the company's projection that the first quarter of 2024 marks a low point for sell-through and revenue.
Despite a challenging fourth quarter of 2023 due to high channel inventory and broader economic issues, management anticipates a significant recovery in demand and revenue, expecting quarterly returns to approximately $500 million later in the year and potential growth to about $700 million per quarter in 2025.
Enphase Energy has issued guidance for first-quarter 2024 revenues between $260 million and $300 million, suggesting sell-through could reach $390 million to $430 million. The company is targeting a reduction in undershipment in the second quarter to restore inventory channels to healthier levels of 8-10 weeks.
Confidence in a return to normalcy in the second half of the year is improving, with Europe showing early signs of recovery and expectations for non-California U.S. states to stabilize and recover in the second quarter. California, however, is experiencing a slower transition to the new Net Energy Metering 3.0 (NEM 3.0) policy, with management predicting a few more quarters for full normalization of sales levels.
Despite short-term pressures on the microinverter segment, Enphase's storage business is growing in the U.S., bolstered by the effects of NEM 3.0 in California. The company is optimistic about the future of NEM 3.0, noting a significant increase in sell-through and activity in storage attachment rates, with the potential for further expansion.
Management's outlook for Enphase is positive, expecting growth and margins to rebound once the current channel inventory issues are resolved. The firm believes that evidence of normalization in channel inventory will be a critical factor in alleviating investor concerns in the forthcoming quarters.
InvestingPro Insights
In light of B.Riley's updated outlook on Enphase Energy (NASDAQ:ENPH), current InvestingPro data and tips provide additional context for investors considering the company's stock. Enphase's market capitalization stands at $14.48 billion, reflecting its significant presence in the renewable energy sector. The company's P/E ratio is currently high at 33.13, indicating a premium market valuation relative to its earnings. Despite a slight decline in revenue over the last twelve months, Enphase's gross profit margin remains robust at 46.2%, showcasing the company's ability to maintain profitability amidst market fluctuations.
InvestingPro Tips highlight that while management has been actively repurchasing shares, signaling confidence in the company's future, Enphase is trading at high valuation multiples in terms of EBIT, EBITDA, and Price/Book, which may warrant caution for value-focused investors. Analysts predict the company will remain profitable this year, and Enphase's liquid assets are well-positioned to cover short-term obligations, suggesting financial stability.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips on Enphase Energy, including insights into sales projections, debt levels, and dividend policies. There are 15 additional InvestingPro Tips available, which can be accessed with an exclusive 10% discount on a yearly or biyearly Pro and Pro+ subscription using the coupon code PRONEWS24. These tips may provide valuable guidance for making informed investment decisions in the context of the company's anticipated recovery and future growth prospects.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.