Why Enphase Plunged On A Day When the Markets Surged

Core Viewpoint - Enphase Energy's shares dropped significantly after missing analyst estimates for the first quarter and providing a lower guidance for the second quarter, compounded by concerns over tariffs affecting margins later in the year [1][2][3]. Financial Performance - In Q1, Enphase reported a revenue growth of 35.2% to $356.1 million and adjusted earnings per share of $0.68, nearly double from the previous year [2]. - Despite the growth, the results fell short of analyst expectations of $362 million in revenue and $0.73 in earnings per share [2]. Guidance and Margins - Management guided for flat revenue in Q2, estimating between $340 million and $380 million, with the midpoint below analyst expectations of $376 million [3]. - CEO noted a 2% gross margin headwind due to tariffs in Q2, which is expected to increase to a 6% to 8% impact in Q3 and Q4 [3]. Macroeconomic and Political Environment - Enphase faces a challenging macroeconomic environment as consumers may avoid large purchases like solar panels, and political factors could negatively impact the company [4]. - The Inflation Reduction Act (IRA) currently boosts Enphase's gross margins by over 10 percentage points and lowers its tax rate by six percentage points, but there are uncertainties regarding the future of the IRA [5]. Valuation and Investment Opportunity - Enphase's stock is currently 84% off its all-time highs, trading at 18.7 times this year's earnings estimates and 13.1 times 2026 estimates, representing the lowest valuation in recent history [6]. - Despite the risks, the company remains profitable, presenting a potential opportunity for long-term investors in residential solar [6].