Several countries are encouraging the adoption of renewable sources of energy due to rising oil and gas prices amid supply constraints and growing concerns about climate change. The Inflation Reduction Act that was passed in the U.S. includes tax credits and other incentives that will boost solar energy usage in the country, thus benefiting Enphase Energy (NASDAQ:ENPH). Enphase Energy stock has had a strong run this year due to the favorable legislation (up more than 31% year-to-date) and is poised to grow further.
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Enphase is Poised to Deliver Strong Growth
Enphase is one of the leading suppliers of microinverter-based solar and battery systems. It has shipped over 48 million microinverters to more than 140 countries. There are 2.5 million Enphase-based systems installed across the world.
Strong demand for its products helped the company deliver market-beating results in the second quarter. Q2 revenue grew 68% year-over-year to $530.2 million, with the company benefiting from impressive growth in its revenue from Europe amid rising energy prices. Furthermore, Q2 adjusted EPS jumped to $1.07 from $0.53 in the prior year, due to higher sales and margin expansion.
Enphase sees solid growth potential in the years to come, both in the domestic and international markets, backed by its innovative products and strategic deals. In Q2, the company’s domestic revenue accounted for 80% of the overall top line, while international operations contributed the remaining 20%.
Enphase recently acquired German firm GreenCom Networks AG, a provider of Internet of Things (IoT) software solutions that help customers manage a variety of distributed energy devices within their homes.
The company is further strengthening its position in Europe through expanded distributor partnerships with CREATON GmbH, Energiekonzepte Deutschland, and BayWa r.e. AG. It is also optimistic about the long-term prospects in other international markets, like Australia, Brazil, and India.
Is Enphase a Buy or Sell?
On Monday, Piper Sandler analyst Kashy Harrison increased his price target for Enphase Energy stock to $280 from $265 and reiterated a Buy rating. Heading into Q3 earnings for the renewables space, Harrison believes that investors’ focus will be on the impact of the Inflation Reduction Act. The analyst prefers companies with a solid balance sheet and the potential for upward earnings revisions.
Overall, the Street has a Strong Buy rating on Enphase Energy stock based on 12 Buys versus four Holds. The average ENPH stock price target of $290.14 implies nearly 20% upside potential. Enphase Energy stock has rallied 32.4% year-to-date.
Conclusion – Enphase Energy Stands to Benefit from Solar Demand
Enphase is benefiting from favorable policies that are aimed at boosting solar adoption. Also, the company’s strategic partnerships and acquisitions are ensuring rapid growth in the domestic and international markets. Most Wall Street analysts continue to see further upside in Enphase Energy stock even after a strong run so far this year.
