Even before the current energy crisis, Enphase Energy (NASDAQ: ENPH) was having a banner year. In fact, as I’ll show you a little later in this article, ENPH stock has been one of the hottest stocks to buy since the onset of the Covid-19 pandemic.
Investors often pay attention to trends, and solar stocks are benefiting from a perfect storm of events. Renewable energy stocks are now front and center as the world is moving quickly to transition away from fossil fuels. This transition is only accelerating due to the war in Ukraine which illustrates how geo-political issues still affect the world’s access to oil and natural gas.
Plus, the recent passage of the Clean Energy bill is set to direct hundreds of billions of dollars to clean-energy projects. And the Biden administration has made it clear that it expects a lot of that money to flow into solar projects. The administration has set a lofty goal that would have 45% of the nation’s energy supply coming from solar by 2050.
By now, you probably sense a but coming. And here it is. Many analysts are projecting that the stock market has at least one more drop coming, and maybe more. And even if the market doesn’t fall, there’s a growing consensus that the market will be range-bound for some time.
With that in mind, investors may wonder if Enphase Energy, which continues to trade at all-time highs is worth an investment at this time.
Investors Have Been Rewarded
I teased in the introduction about the growth in ENPH stock in the past few years. Here’s a way to put that into context:
|
|
ENPH Stock |
S&P 500 |
|
Since March 2020 |
1,128% |
71% |
|
Last 12 months |
96% |
- 11.73% |
|
Year-to-date |
75% |
-16.79% |
|
Last month |
8% |
-5.73% |
These numbers are even more impressive when I compare them to the numbers that Kate Stalter posted in this article about solar stocks in mid-August.
- 1 month: +34.36%
- Year-to-date: +58.97%
- 1 year: +56.73%
The takeaway is clear. At a time when many stocks, including other solar stocks, are failing to gain traction, ENPH stock continues to power higher.
However, that’s where there’s room for some concern. As I write this article, Federal Reserve chair Jerome Powell delivered remarks that are reminding investors that there may be more “pain” for consumers and investors.
A Solution for Every Solar Installation
If you’re not familiar with Enphase, the company doesn’t manufacture or install solar panels. Rather, it offers products that address the issue of how to maximize the efficiency of solar panels when the sun is not shining.
Enphase’s core product is its IQ8 microinverter that converts direct current (DC) power from solar panels to alternating current (AC) power. Also, the microinverters reduce the risk of a single-point failure. In addition to its microinverter, the company offers consumers a complete energy system that includes batteries and the necessary software to “bank” solar power for use regardless of weather conditions.
Expansion Into Europe Could be a Catalyst
For much of the last year, Enphase has been announcing plans for a major expansion into Europe. Those plans got a big boost when the company announced its acquisition of GreenCom, a German company as well as the expansion of its partnership with BayWa to distribute the company’s products in Germany and Benelux.
The ongoing energy crisis in Europe has a way of focusing a country’s (or a continent’s) intentions. And although it may not do much for this current winter, many European countries are realizing that they need to be less reliant on a single energy source.
That bodes well for solar stocks in general. And because it has a huge addressable market, it should help Enphase as well.
Over the Long-Term ENPH Stock is a Buy
Enphase has been on my watchlist for some time. It feels a bit expensive for me at this moment and the stock chart is flashing some overbought signals. Still, as Thomas Hughes wrote, analysts made ENPH stock “the most upwardly revised stock of the season.”
That bodes well for the stock’s long-term fortunes. Whether the price is right for you right now may be the only question. Still, for investors willing to accept some short-term downside risk there aren’t many options better than ENPH stock.
