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Enphase Energy, Inc. (ENPH) Message Board

  • greenbjr greenbjr Aug 8, 2013 2:02 PM Flag

    My Foolish reasoning

    Last month, I asked a friend in the solar field if she could recommend a company to invest some retirement money in. Enphase was the only company she was excited about. Thankfully, the stock price dropped 27% during the 30 days I've been checking the company out, yet my due diligence reveals there is tremendous potential for growth here and I may not have to wait until retirement to see a dramatic rise in price. Today's my day to begin diving in to Enphase. Reasoning: 1) is the only significant seller of microinverter systems in the world; 2) owns important valuable patents on technology that makes solar power systems more reliable and productive; 3) the powerful mission and the management, a nicely balanced group of “veterans of the solar, telecom, networking, and software industries”; 4) the employe performance bonus (see SEC filing) to motivate ALL employees, not just management, to help achieve their ambitious financial goal to earn a profit next year; and finally 5) its youth! ENPH is a young, discounted 2012 IPO. (A small cap solar with growing revenues would have demanded a premium price during the booming solar years.) Oh, and incidentally, Enphase recently entered a relationship with Lennar's SunStreet Energy subsidiary to provide microinverters for new home construction. That's my reasoning, but I'm a teachable Fool that's willing to be humbled. I think it's a good time to invest in solar. Solar panels are showing up everywhere here in the West, and the need for improved efficiency isn't going away, so compare this company to any other company involved in the solar field and please tell me what I'm missing or place your bet too....

    Sentiment: Strong Buy

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    • veterans of the solar, telecom, networking, and software industries
      This means executives and directors will be wanting good-pay and options and show that they want to get paid for running a money-losing company (so far). Look at R&D costs - very high for a company having such a limited set of products.

      • 1 Reply to jmcvicker
      • I'm OK with the R&D costs at this point in their lifecycle. Management can throttle back on engineering staffing pretty quickly when the time comes - and it will. What I'm more concerned about is how the product will hold up in the field over the long term. 25 years is a long warranty. Does anyone have any data/insight into how their first generation products are faring on the roof? Since their 1st gen has been in the field for about 5 years now we're just getting to the point where I'd expect to start seeing some realistic field failure data coming in from the first wave of installations.

        BTW - I'm long and sitting on about a 50% gain. Just wondering how much longer I should sit on it. If I was comfortable with the warranty question I'd be loading up on the stock at this price. These guys absolutely own the mindshare in this market. Not worried at all about the newcomers.

    • Interesting post, thanks for sharing. Some relevant facts to your 5 points:

      1) SMA’s Sunnyboy is now available but has ridiculous use limitations and is/was always only intended as a supplement to an SMA string system.

      ReneSola now also has a line of micros but few I’ve spoken to would risk trusting them long-term. Perhaps their revenue growth numbers to be released 8-15 will show otherwise.

      ABB’s newly acquired Power-One was supposed to be the biggest concern to Enphase but I encourage everyone to please talk to installers on this matter.

      2) Intellectual property is only as good as its enforceability. It is true that ENPH has an excellent patent collection, but are they willing/able to chase offenders?

      3) 4) and 5) Enphase leadership is only now showing proof that they are able to tighten their belts and limit expenditures to developing sellable products and gaining global certification. Percent of sales that are non-domestic is up sharply. The significance of this is far greater than most realize.

      I am surprised at this most recent ENPH financial report since, frankly, I doubted they had the discipline to stop wasting money on useless endeavors like thermostats.

      As an inverter investment they now actually look relatively good.

      SMA’s recent report shows a YOY sales growth of negative (-48) percent.

      Renesola is sitting on a staggering $1.07 BILLION debt and they are desperate for cash to continue operations. Thus their recent announcement to try selling preferred shares. The words “Preferred” and “ReneSola” seem oxymoronic in many regards IMHO. Enphase doesn’t even have $0.07 billion in debt. In fact their debt has reduced this quarter and cash nearly held steady. Again, I didn’t think they had it in them but they have finally shown spending discipline.

      For these reasons, I must reluctantly admit that Enphase is a relative gem among inverter investment options.

    • Re: your point #1--SMA, the worlds largest inverter manufacturer, has just started shipping its own micro inverter. Thus there will be increasing competition for Enphase to deal with.

 
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