Why Enphase Energy Stock Soared in February
What happened
The stock of solar system technology company Enphase Energy (NASDAQ: ENPH) had a strong month in February. Two separate catalysts were really responsible for the gains, resulting in an overall jump of 18.7% for the month, according to data from S&P Global Market Intelligence.
So what
First, the company reported its fourth-quarter and full-year 2021 results on Feb. 8, prompting a big single-day pop in the stock. The second catalyst wasn't company-specific. Many solar and other alternative-energy stocks have soared in the final days of February as oil prices jumped on the backdrop of war in Ukraine and geopolitical uncertainty.
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Now what
After having given up some gains made after its strong earnings report, shares of Enphase soared almost 32% in the last five days of the month. But the earnings report also gave the stock a single day double-digit boost as concerns over potential supply chain problems were proven overly pessimistic.
Enphase reported record revenue of $412.7 million for its fourth quarter, bringing full year 2021 revenue to $1.38 billion, jumping nearly 80% over the 2020 total of $774.4 million. After generating $92.7 million in cash flow from operations, and spending $300 million in share repurchases in December, Enphase also ended the year with $1 billion in cash on its balance sheet.
The quarter was successful thanks to continued strong demand along with execution by the company. With supply-chain constraints still in focus for many businesses, Enphase CEO Badri Kothandaraman addressed that situation in the company's earnings call with investors, saying, "Our situation has been stable primarily due to diligent supplier management and qualification of alternate suppliers during the past year."
The company expects revenue to continue to increase in the first quarter of 2022, with it expecting a range of $420 million to $440 million. With oil prices hovering over $100 per barrel, many investors expect investments in renewable sources to remain strong, helping to drive that revenue growth.
For investors, the main concern with Enphase should be its valuation. At its recent market cap of $21.2 billion, shares are trading at a price-to-earnings (P/E) ratio of almost 150. While continued strong growth should bring that down over the next several years, it's an investment that comes with plenty of risk should there be any stumbles in the company's growth rate.
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Howard 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.
