Third-quarter revenue fell 28.5% from a year earlier to $293.3 million and missed estimates. The solar-equipment maker expects sell-through to fall another 10% this quarter. The shares fell to their lowest price since March 2020.
Enphase Energy's problem is not one bad quarter. It is that management does not see the next one improving.
The maker of solar microinverters and home batteries reported third-quarter revenue of $293.3 million, down 28.5% from a year earlier and below the roughly $306 million analysts expected. Adjusted earnings were 41 cents a share, against an estimate of about 50 cents and 90 cents a year earlier. The adjusted gross margin slipped to 45.0% from 46.8% in the second quarter.
"We are not seeing any meaningful recovery in the U.S. demand," said Badri Kothandaraman, the chief executive.
The guidance
For the fourth quarter, Enphase guided to revenue of $225 million to $255 million, a midpoint of $240 million against estimates near $300 million. That range includes about $51 million of what the company calls safe-harbor revenue. The guidance assumes sell-through, the pace at which installers sell Enphase products to homeowners, falls about 10% from the third quarter. The adjusted gross margin is expected to fall to 40% to 43%.
What sell-through shows
The sell-through data explain the guidance. In the U.S., sell-through rose 5% from the second quarter but was down 35% from a year earlier. Globally it rose about 1% from the second quarter, against the 10% the company had expected. Europe fell 12%.
Removing the safe-harbor revenue makes the underlying picture weaker still. Excluding it, the fourth-quarter midpoint would be roughly $189 million, by our arithmetic.
The reaction
Enphase closed Tuesday at $29.76. On Wednesday it fell as low as $23.83, its lowest price since March 2020, and was at about $24.84 in early afternoon, down about 16.5%. Oppenheimer and Roth downgraded the stock and JPMorgan cut its price target to $29.
The company has $931.8 million of cash and marketable securities, which gives it time.
Bottom, or not yet?
The case that the worst is being priced in: a company with a strong balance sheet, still positive adjusted earnings and a gross margin above 40% is trading at its lowest price since 2020, and guidance that assumes a further fall in sell-through sets a low bar.
The case that it is not: management says it sees no recovery in its largest market, the quarter's sell-through gain fell well short of its own expectations, and a meaningful share of the fourth quarter depends on one-time tax-related sales.
What to watch
U.S. residential solar installations in coming months, any change in sell-through trends in Europe, battery sales as a share of revenue, and whether peers such as SolarEdge and Sunrun report similar demand.