Why Enphase Energy Shares Are Shining Today

Shareholders in Enphase Energy (ENPH 19.57%) got the news they wanted to hear last night when the solar technology company released its fourth-quarter financial results. Enphase stock is soaring today following this report.

A slowdown in business has led Enphase shares to fall nearly 50% over the past year. And that includes the current surge in stock prices. The stock jumped more than 20% this morning and remained up 18.8% as of 10:20 a.m. ET.

Enphase CEO hits rock bottom

Indeed, the company has apparently hit a low point in its business and is seeing its fortunes reverse from there. High interest rates have hurt solar panel sales and led to a boom in inventories in North America and Europe. The company said its sales in Europe declined 70% sequentially from the third quarter, primarily due to lower shipments to manage high inventory levels at its distribution partners.

But during his conference call with investors, Enphase CEO Badri Kothandaraman also said:

We are going through a period of slowing demand. We think the first quarter could be the weakest quarter. Europe is already showing early signs of recovery, and we expect non-California states to rebound quickly.

A solar inflection point

With the stock in free fall over the past year, that's all investors needed to hear, and it explains why Enphase stock is soaring today. Enphase expects demand for its solar products to improve throughout 2024. But the recovery won't be immediate.

The company expects first-quarter revenue to be flat to slightly down compared to the fourth quarter. That would represent a sharp decline from the first quarter of 2023. But investors heard what they wanted to hear: that activity may have bottomed out and that an inflection point is here. That was enough to generate a jump of nearly 20% today.

Howard Smith has no position in any of the stocks mentioned. The Motley Fool stocks and recommends Enphase Energy. The Motley Fool has a disclosure policy.

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