Markets

Why Enphase Energy Stock Dropped 5% This Morning

What happened

Shares of Enphase Energy (NASDAQ: ENPH) stock crashed more than 5% in very early trading Monday, tried to recover their losses, failed, and are slumping again. As of 10:55 a.m. EDT, Enphase is down 2.1% as Wall Street debates with itself precisely how much Enphase stock is worth.

So what

Early this morning, analysts at Credit Suisse raised their price target on Enphase stock from $60 to $89, reports StreetInsider.com. Without knowing further detail on the target hike, however, investors were left with little reason to react positively to the news -- the more so because CS left its neutral rating on the stock unchanged.

That's the bad news. The good news is that Roth Capital tried to ride to Enphase's rescue, releasing a target price hike a couple of hours later, from $90 to $120. As TheFly.com reports, Roth, which rates Enphase as a buy, is predicting "healthy" earnings when Enphase reports its third-quarter financial results. Moreover, based on strong performance in the U.S. residential solar market, coupled with European expansion, Roth believes that Enphase will guide investors higher in the fourth quarter as well.

Roth notes that its gross margin in particular should look strong as microinverter pricing is "stable" and production in Mexico is ramping.

Chalkboard drawing of stock chart arrow going up being erased and pointing back down

Image source: Getty Images.

Now what

And yet, on closer review it appears that Roth is in the minority in its optimism. Enphase reports Q3 earnings tomorrow after close of trading, and most analysts forecast that sales will decline as much as 6%, to $168.6 million, with profits down 20% at $0.24 per share.

On the one hand, that suggests that Enphase has a pretty low bar it needs to clear tomorrow. On the other hand, though, given that Enphase stock has quadrupled over the past year in the face of pessimistic projections, there's plenty of room to fall if Enphase fails to deliver an earnings beat tomorrow.

10 stocks we like better than Enphase Energy, Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Enphase Energy, Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of October 20, 2020

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

ENPH

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More