What happened
Solar technology systems equipment maker Enphase Energy (NASDAQ: ENPH) shares popped Monday as upgrades continued from Wall Street analysts. The stock jumped by about 10% in early trading, and remained higher by 7.7% as of 12:45 p.m. ET.
So what
Monday's upgrade came from Piper Sandler analyst Kashy Harrison, who moved Enphase shares to the equivalent of a buy rating while maintaining a price target of $255 per share. That upgrade came on the heels of two other firms commenting on the stock late last week. Deutsche Bank maintained its buy rating on the stock and made a slight cut to its price target, from $285 down to $280. And HSBC initiated coverage of Enphase with a buy rating and a price target of $271. Those targets are well above Friday's closing price of just under $209 per share.
Now what
Investors have reacted to the votes of confidence by boosting Enphase shares by more than 15% in the past week. Enphase doesn't announce its first-quarter earnings results until April 25, but analysts -- and investors -- are expecting good news.
In Monday's note, Harrison noted that Enphase is gaining momentum in international markets. The company's latest-model solar panel microinverters, the IQ8 series, could help boost revenue by about 40% in 2023, he said. The IQ8 also carries a higher profit margin, which could help the company reverse the trend of declining margins that has prevailed for the past three years. Supply chain issues have increased its costs, but Enphase steadily boosted its sales over that period.
Harrison believes EBITDA margins could increase to a percentage in the mid-30s this year, versus 31% in 2022. Enphase reported record quarterly revenue of $725 million in 2022's fourth quarter. For the full year, revenue increased by 69% and net income nearly tripled. Investors and analysts expect more of the same in 2023, which would help to keep this high-flying solar stock on the move.
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HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Enphase Energy and HSBC Holdings. The Motley Fool has a disclosure policy.
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