Enphase Energy (NASDAQ: ENPH)stock is down 16% post market last night on the release of results. There are several different ways of looking at why this has happened. The most obvious and first one is that results were good: “Non-GAAP EPS of $1.37 beats by $0.15, revenue of $726.02M beats by $5.51M”, Not just are results up they're better than expected. So, the stock should rise, right? Except that's not quite how stock markets do work. Even gross margins of 45% don;'t make up for this next part of the announcement: “Q2 Outlook: Revenue to be within a range of $700.0 million to $750.0 million, which includes shipments of 80 to 100 megawatt hours of Enphase IQ Batteries GAAP gross margin to be within a range of 41.0% to 44.0%”
Markets are interested in what happens next - always and only. So, while recent performance has beaten expectations near future ones are well below. Thus the stock drops 16%. That's just how it works - markets are forward looking.
Our second view is more specific to Enphase. They make microinverters - the miracle bit that makes a solar power system work. Their US market penetration is above 80% at leat for domestic installations. There's a significant push for them to try to similarly colonise the commercial installation market. Given politics they've a certain protection in the US against Chinese competition. This is less important - or helpful - in both commercial and European markets. So, will that success be duplicated or not?
Enphase Energy stock price from NASDAQ
The third issue is a corollary to that expectations idea above. Enphase's stock price had built into it a significant element of future growth. As before, stock markets are forward looking. So, someone growing swiftly in an expanding market, the assumption will be of further swift growth and that will be built into the capital valuation. Those prospects get dented and so that premium - that growth premium - will be knocked off the stock price.
That's why this slowdown - it's a stall really - is so damaging to the Enphase stock price. Not because it's a disaster or anything but because it kills off those previous expectations of continued swift growth.