Price Target Lowered by $20, Truist Remains Long-Term Bullish By Investing.com

On Wednesday, Truist Securities adjusted its price target for Enphase Energy (NASDAQ:), a leading solar technology company, lowering it to $110 from $130. The company received its buy recommendation for the stock. The adjustment reflects a more cautious outlook on the company’s near-term performance, particularly given expected volume growth and the impact of Federal Reserve interest rate cuts.

The Truist Securities analyst has cut third-quarter 2024 revenue and EBITDA estimates slightly to $391 million and $123 million, respectively, from $394 million and $132 million previously. These numbers are just below consensus estimates of $393 million in revenue and $123 million in EBITDA. The upcoming earnings call is expected to focus on the pricing environment, demand in the U.S. housing market, product sales in Europe and the company’s domestic manufacturing footprint.

For full-year 2024, the analyst revised down revenue and EBITDA estimates to $1.38 billion and $411 million, respectively, compared to the official $1.41 billion and $442 million . This adjustment comes due to a slower-than-expected recovery in demand in the US housing market, continued challenges in Europe and a higher share of battery sales in the second half of 2024. Estimates for 2025 were also reduced, with sales now at $1.88 billion – Dollars and EBITDA is expected at $665 million, versus the official forecast of $2.06 billion in revenue and $793 million in EBITDA.

The new price target of $110 is based on a 23x multiple applied to the firm’s 2025 EBITDA estimate of $665 million. This multiplier has been increased from 22x previously, while the peer group average has also been adjusted from 9x to 10x. Despite the reductions in estimates and price target, Truist Securities reiterates its positive stance on Enphase Energy, pointing to the company’s strong margin structure and innovative solar and storage products as justification for a premium valuation relative to its competitors.

In other recent news, Enphase Energy has been the subject of several analyst comments. RBC Capital downgraded shares of Enphase Energy to Sector Perform, citing a more competitive market environment and a new valuation approach. The firm forecasts Enphase Energy’s revenue for 2025 and 2026 to be below consensus estimates. BMO Capital Markets also adjusted its outlook and lowered its price target due to concerns about European inverter demand, but maintained a “Market Perform” rating.

Jefferies maintained a “hold” rating but lowered its price target amid expected softer losses in the third quarter. Mizuho Securities maintained an “Outperform” rating but cut its price target due to recalibrated long-term revenue growth expectations.

Enphase Energy has also made significant progress in product development and expansion. The company began shipping its new IQ8HC™ microinverter and launched an advanced solar system in India that includes the IQ Battery 5P and IQ8 microinverters. The company also unveiled a new solution for California homeowners looking to expand their solar installations without incurring penalties under the new Net Energy Metering (NEM) 3.0 tariff program.

Enphase Energy reported second-quarter revenue of $303.5 million, driven by shipments of 1.4 million microinverters and 120 megawatt-hours of batteries. However, the company’s forecast for the third quarter of 2024 is 3% below market expectations.

InvestingPro Insights

Recent data from InvestingPro sheds additional light on Enphase Energy’s current market position and financial performance. The company’s market capitalization is $12.46 billion, reflecting its significant presence in the solar technology sector. However, Enphase’s price-to-earnings ratio of 96.37 and price-to-book ratio of 14.09 suggest that the stock is trading at a premium valuation, which is consistent with Truist Securities’ assessment of the company’s premium position compared to matches its competitors.

InvestingPro Tips highlights that Enphases stock has recently taken a significant hit, moving down 12.61% over the past week and down 17.45% over the last month. This downtrend is consistent with the analyst’s more cautious outlook and reduced price target. Additionally, the data shows that Enphase’s revenue growth has slowed significantly, with a decline of 49.21% in the trailing twelve months through the second quarter of 2024, supporting the analyst’s concerns about a slower demand recovery.

Despite these challenges, InvestingPro Tips also points out that Enphase operates with moderate leverage and has cash in excess of current liabilities. This could provide the company with some financial stability as it navigates current market conditions. For investors seeking more comprehensive analysis, InvestingPro offers 18 picks for Enphase Energy that provide additional understanding of the company’s financial health and market position.

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