Shares of Enphase Energy (NASDAQ: ENPH) were all over the map today after the company reported second-quarter 2020 earnings. Shares fell 2% early in trading but rose 6.5% by midday. At 12:55 p.m. EDT, shares were up 6.4% and seemed to be trending toward a positive day.
Revenue for the quarter was $125.5 million, down from $134.1 million a year ago, and net loss was $47.3 million, or $0.38 per share. But non-GAAP net income was $23.5 million, up slightly from $23.2 million a year ago as gross margin increased from 34.1% to 39.6%.
For the third quarter of 2020, management expects revenue to be $160 million to $175 million, with non-GAAP gross margins of 37% to 40%. You can see that margin improvement isn't going to be a one-time phenomenon, and that could drive a sharp increase in earnings next quarter.
Enphase's microinverter business is hitting on all cylinders despite the drop in residential solar installations in much of the world because of COVID-19. But there should be some excitement about an upcoming energy-storage product launch as well, which could increase both revenue and margin per solar installation for the company. I like the direction Enphase Energy is headed, and while shares are extremely expensive, with a P/E ratio of more than 40, this is the kind of long-term growth stock in renewable energy investors should be buying into.
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