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Enphase Energy, Inc. (ENPH) Message Board

  • traderguido traderguido Nov 8, 2012 3:44 PM Flag

    Bleak Future of Enphase


    Doubtful that anyone reads this but what the heck I’ll give it a try. It might have to be two parts.

    I enjoy analysis and I needed to see yesterday’s financials before posting this and it’s still just my own observations and opinion. If anyone sees anything that is inaccurate, please feel free to correct me ASAP.

    My October 16th predictions for 61,000 installations by Nov 5th was spot on and I was pretty close for sales, but even my guess of reduced guidance was much higher than what they gave and their losses were far greater than I expected.

    The only things Enphase had in their favor were monstrous growth and the possibility of a takeover. They have now proven that they no longer will have the kind of growth they enjoyed briefly. Profits were already bad and getting worse but with yesterday’s news of huge sanctions against Chinese panels for the next 5 years, you can kiss goodbye the super cheap panel prices that were handing growth to Enphase and others.

    And with Enecsys owning the UK, SMA owning Germany, APS owning Australia and PWER invading the U.S. next year with their higher-powered microinverters, there are no longer good markets to expand into and their existing markets are soon to see heavy competition.

    And speaking of China, there are already several very suspicious looking Enphase “clones” out there which may or may not be contestable on the international patent scene. That’s one of many disadvantages to manufacturing in China.

    The failed business model of giving away product to sustain market share provides no future benefit for doing so. What good could it possibly do to sell as much as possible at competitive pricing when a greater customer base simply means a greater future loss to the expense of maintaining warranty and providing continued online support which they stopped charging for. They’re stuck, if they go back on their word and start charging again for online service, they will face lawsuits I promise you.

    If you’re going to mention margins, give it a rest. They spend more than their margin on R&D and nearly twice that again on marketing and operations. That is why you see a widened loss despite a greater claimed margin.

    This all means they need more capital just to continue operating this failed model, a lot more capital. Since they can’t even think about another stock offering, they were forced to add large debt to their long list of problems thus the new substantially larger line-of-credit. If that doesn’t scare you away from these guys it should. They will now begin racking up large debt that will make them even more unattractive as a buyout.

    Siemens knows all of the above AND has publicly announced last month that they are getting out of the unprofitable solar arena. That was my sign to bail ENPH. If they haven’t already, Enphase will now be forced to quietly dissolve the agreement they started with Siemens a year and a half ago. The competent analysts out there know that with Siemens pulling out of solar, the odds of a profitable buyout for ENPH are now slim-to-none since Siemens was always the likely suitor for a buyout of ENPH. By profitable, I mean adequately above the institutional IPO price of $6.

    Most entered this investment expecting north of $10 a share within a year. We’re probably done with the threes. If another company thinks they can double the price of an M215, then they might consider buying Enphase. Otherwise, it’s not worth buying now. IMHO

    I believe it is also reasonable to expect much higher legal expenses for Enphase for intellectual property battles and possible upcoming investor claims.

    We may have hit bottom but I doubt it since most major brokerage houses will now be forced to pull ENPH off margin and this will force more selling than most realize. Even if insiders finally sack up and buy a few shares, the margin calls will likely more than counter any upside pressure from that news. Right now, the shorts are your only friends since they are the greatest buying pressure and although somewhat high, today’s volume does not begin to indicate major covering of short positions. Hopefully you’ll get a pop up tomorrow on insider buying and an upgrade by one the major holders. Again all just IMHO. Good luck. No position long or short here.

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