Seaport says Buy Enphase as things get better, BofA says Sell as they get worse

Shares of Enphase Energy (ENPH) are in the spotlight on Thursday after Seaport Research upgraded the stock to Buy ahead of what it predicts will be a U.S. residential solar recovery, while BofA cut its target on the shares and kept an Underperform rating on the name. The latter sees a “still challenged” U.S. residential market and sees incremental pressures for Enphase in Europe.

BUY ENPHASE: Seaport Research upgraded Enphase Energy to Buy from Neutral with a price target of $185, citing a U.S. residential solar recovery in a research note partially titled “Get there early to ensure you catch the sunrise.” The firm thinks that Enphase will benefit from ongoing share repurchases, continued robust growth in Europe’s residential solar market and “a clear emergent recovery in U.S. residential solar installations” by mid- to late-Q2 of 2024.

SELL ENPHASE: Meanwhile, BofA lowered the firm’s price target on Enphase Energy to $114 from $135, keeping an Underperform rating on the shares. After the firm’s “full fundamental reset” following a Q2 “earnings disappointment,” it now further revises down estimates to account for worsening California demand data points, a “still challenged” U.S. residential market and what it sees as incremental pressures for Enphase in Europe. BofA notes that latest conversations with Enphase management suggest -40% decline in California demand would result in a $40M decline in sell in to preserve stable levels of channel inventory and equate to roughly flat revenues quarter-over-quarter. While the firm assumes an improvement in California solar and storage demand in the second half of 2024, it also expects sustained challenges in the broader U.S. market.

BofA does not contemplate material share loss in U.S. residential to Tesla (TSLA), for example, nor significant price cuts. Lapsing SunPower (SPWR) exclusive supply agreement impairs sentiment, as well, the firm adds.

CAUTIOUS NEAR-TERM: On Monday, Citi lowered the firm’s price target on Enphase Energy to $170 from $209, but kept a Buy rating on the shares. The firm said that despite stabilization of U.S. demand excluding California, it is cautious near-term given weaker than expected Netherlands and California. Citi’s app data analysis shows weaker sell-through in Netherlands quarter-to-date.

PRICE ACTION: In Thursday morning trading, shares of Enphase have dropped about 1% to $122.96.