Why Is Enphase Energy (ENPH) Down 58.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Enphase Energy (ENPH). Shares have lost about 58.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Enphase Energy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Enphase Energy Q4 Earnings Beat, Revenues Up Y/Y

Enphase Energy, Inc. reported fourth-quarter 2019 adjusted earnings of 39 cents per share, which surpassed the Zacks Consensus Estimate of 33 cents by 18.2%. The bottom line also surged a massive 875% from 4 cents reported in the prior-year quarter.

The year-over-year uptick can be attributed to solid revenues as well as operating income growth witnessed in the fourth quarter.

Barring one-time adjustments, the company posted GAAP earnings of 88 cents per share compared to the earnings of a penny in the year-ago quarter.

For 2019, the company reported adjusted earnings of 95 cents per share, compared to the Zacks Consensus Estimate of 89 cents. The company reported adjusted earnings of 10 cents per share in the prior year.

Revenues

Enphase Energy’s revenues of $210 million in the fourth quarter surpassed the Zacks Consensus Estimate of $204.8 million by 2.5%. The top line surged 119.8% from the year-ago quarter’s $92.3 million driven by
solid shipments.

For 2019, the company recorded adjusted revenues of $624.3 million, exceeding the Zacks Consensus Estimate of $619.1 million by 0.8%. Moreover, the top line surged 97.5% from last year’s $316.2 million.

Operational Highlights

Enphase Energy’s total shipments during the reported quarter amounted to approximately 677 megawatts DC or 2,112,725 microinverters.

Gross profit totaled $77.9 million, soaring 176.5% from $28.2 million a year ago.

Total operating expenses increased 44.4% year over year to $33.4 million. The uptick can be attributed to higher research and development, sales and marketing along with general and administrative expenses.

Operating income during the quarter totaled $44.4 million compared to the income of $5 million in the year-ago quarter.

Financial Performance

Enphase Energy had $251.4 million of cash and cash equivalents as of Dec 31, 2019, up from $106.2 million at the end of 2018.

Cash flow from operating activities amounted to $102.3 million at the end of fourth quarter 2019 compared with $1.88 million in the year-ago period.

Long-term liabilities were $241.7 million at the end of the fourth quarter compared with $185 million as of Dec 31, 2018.

Q1 2020 Guidance

For first-quarter 2020, Enphase Energy expects to generate revenues of $200-$210 million, including $44.5 million of revenue for ITC safe harbor shipments. The Zacks Consensus Estimate for the same is pegged at $171.7 million, lower than the company’s guided range.

Non-GAAP operating expenses are expected between $28 million and $30 million, excluding approximately $7 million estimated for stock-based compensation expenses, acquisition-related expenses and amortization.

GAAP and non-GAAP gross margins are likely to be in the range of 36-39%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 24.29% due to these changes.

VGM Scores

At this time, Enphase Energy has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Enphase Energy has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.