Enphase Energy Reports Disappointing Q1 Results, Guidance Misses Expectations
Leading microinverter and battery storage solutions provider Enphase Energy released its Q1 2024 results, falling short of consensus expectations. Although revenues in Europe saw a 70% sequential increase, sales in the company’s core domestic market declined by 34% quarter-over-quarter due to seasonality and softer U.S. demand.
Despite the underwhelming performance, Enphase managed to generate $41.8 million in free cash flow, which was primarily allocated to share repurchases. The company also withheld $60 million in shares to cover taxes for employee stock vesting and options, resulting in a reduction of 480,735 outstanding diluted shares.
However, Enphase’s Q2 guidance, while showing a sequential improvement, fell short of consensus estimates. Analysts had predicted the weak Q1 performance and slower-than-expected recovery, as Enphase’s heavy exposure to the flagging U.S. market continues to hinder its financial results.
Management expressed optimism about both Europe and the United States, reiterating expectations for channel inventory to normalize by the end of Q2. However, analysts remained underwhelmed by the mediocre outlook and raised concerns about the company’s expectations for the rest of the year.
Given the ongoing weakness in the company’s core U.S. market, analysts anticipate further estimate and price target cuts. Consensus 2024 revenue and earnings per share projections are likely to decrease in the coming weeks. Additionally, the consensus estimates for 2025 also appear aggressive, with the expectation of a 50% sales increase difficult to justify, especially considering the likelihood of higher interest rates in the United States.
Bottom Line
Enphase Energy’s weak Q1 results and disappointing Q2 guidance highlight the headwinds the company faces in its core domestic market. While management expects an eventual recovery, the slower-than-expected industry rebound is likely to lead to another round of estimate cuts. In contrast, the encouraging sales trends in Europe bode well for competitor SolarEdge, which derives over 60% of its sales from that region.
Given the mediocre outlook, it is advisable to hold off on initiating or adding to existing Enphase Energy positions at this time.
