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The solar industry has been on fire over the past few quarters. Solar MLPE giant Enphase (ENPH) has been on a particularly solid run and continues to surge upwards. Despite an ongoing pandemic, Enphase has approximately quadrupled in market capitalization since March.
Enphase is an increasingly dominant force in the promising solar MLPE space. The company is also successfully moving into the even larger home energy industry. Enphase is at the forefront of a rapidly changing distributed energy industry and continues to innovate at a rapid rate.
Strong Performance Continues
Enphase continues to be one of the strongest performers in the revitalized solar industry. The company has consistently outperformed expectations, which has contributed to the company stunning rise over the past year. While the company’s Q2 revenue of $125.5 million decreased ~6% Y/Y, this revenue figures still impressive considering the industry-wide impact of COVID-19.
Enphase has transformed from one of the most overlooked solar companies to one of the largest solar companies in the world. The company’s success in the MLPE space, particularly with microinverters, has allowed it to expand its reach far beyond just solar MLPE products. Enphase is now a serious contender in the far larger home energy market.
Enphase has seen its value skyrocket in recent years.
The energy industry is set to undergo dramatic changes in the coming years. The arrival of cost-effective solar PV and energy storage is changing the dynamic of how energy is delivered. The residential market is already starting to transform with the arrival of cost-effective distributed energy.
Enphase is contributing greatly to this transformation with its innovative solar MLPE products. However, the company is now starting to dramatically widen its addressable market by moving into the wider home energy market. The opportunities in the home energy industry are far too large to ignore this point.
Enphase is notably making strides in its Ensemble energy management technology and its Encharge storage systems. The company just started shipping its Encharge systems in the US and is currently experiencing more demand than it can meet in Q3. Given how much attention energy storage is starting to receive, Enphase’s battery ramp-up is coming at the exact right time.
Enphase estimates that its 2022 SAM in residential solar, small commercial solar, residential storage, and off-grids solar and storage will be $4 billion, $1.5 billion, $3 billion, and $4 billion respectively. Enphase is positioning itself well to take advantage of these burgeoning sectors.
Enphase is starting to extend its reach far beyond just microinverters.
Major Challenges Ahead
While Enphase is starting to significantly expand its addressable market by entering the broader energy industry, the company is now facing far more competition. The energy storage market, in particular, is attracting a huge amount of competition. In fact, energy storage could become one of the most competitive industries in the world given how lucrative the industry is becoming.
Tesla (TSLA) and a growing number of major automotive companies are starting to invest billions into energy storage technologies like lithium-ion batteries. The success of Tesla has catalyzed investments into energy storage like never before. While Enphase already has a sizable head start in energy storage technology compared to most others in the industry, the company could have a hard time competing against automotive giants on the battery front.
While Enphase has a solid foothold in home energy storage, the company faces incredibly tough competition in this market.
Enphase is now one of the most valuable solar companies at its current market capitalization of ~$13 billion. While Enphase appears to be expensive at a forward P/E ratio of ~90, the company still has more room to grow. Enphase is at the forefront at an exponential solar MLPE growth curve that is expected to extend for the foreseeable future. The company is also cementing an increasingly strong foothold in the promising home energy industry.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.