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Enphase Commences Shipment of IQ Microinverters From Mexico

Zacks Equity Research

Enphase Energy Inc. ENPH recently started shipping its seventh-generation IQ microinverters from Mexico to the U.S. market. The shipment constitutes part of the company’s extended manufacturing agreement with the multinational technological manufacturing company, Flex Ltd FLEX.

A Brief Note on IQ Microinverter System

The Enphase IQ Microinverter System simplifies solar installations and provides complete alternative current solution that utilizes no high-voltage direct current. This provides safer solar solution to homeowners. Enphase introduced the seventh-generation microinverter in first-quarter 2018, which is light and compact, and offers state-of-the-art power performance.

The IQ microinverters leverage the company’s 55nm custom ASIC for higher integration, reliability, upgradeability and scalability.

How Collaboration With Flex Helps Enphase?

During September 2018, Enphase expanded its manufacturing agreement with Flex to include the company's facilities in Mexico for serving customers better while maintaining core competency in product quality. Under the agreement, Flex would deliver IQ microinverters and other products manufactured in Mexico to the U.S. market for mitigating the United States Trade Representative (USTR) Section 301 tariffs. Eventually, such a move is expected to help the company increase its global capacity, improve customer delivery times and strengthen global manufacturing strategy.

Our View

Per the U.S. Energy Information Administration (EIA), solar generation in the United States is expected to increase 13.1% to 303,000 MWh/d in 2019 from 268,000 MWh/d in 2018. Moreover, the International Energy Agency (IEA) anticipates a 17% average annual growth of solar power generation between 2017 and 2030.

Notably, these projections from both EIA and IEA indicate a massive addition of solar generation in the electricity production mix. This, in turn, will have a positive impact on the demand for microinverters, going ahead, which will significantly benefit microinverter producers like Enphase.

Enphase's total revenues for the first quarter of 2019 were $100.2 million, up 9% sequentially and 43% year over year. This growth was led by high shipping numbers. Notably, the company shipped 976,410 microinverters during the quarter, of which approximately 94% were the seventh-generation IQ microinverters. This demonstrates the growing demand for the seventh-generation Enphase IQ microinverters, which, in turn, is expected to boost the company’s top line, in the days ahead.

Price Movement

Shares of Enphase have surged 159.3% in the past year compared with the industry’s growth of 37.8%.

Zacks Rank & Key Picks

Enphase Energy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few better-ranked stocks from the same space are Canadian Solar CSIQ and SunPower Corporation SPWR, each carrying a Zacks Rank #2 (Buy).

Canadian Solar came up with an average positive earnings surprise of 51.66% in the last four quarters. Its long-term growth rate currently stands at 32%.

SunPower delivered an average positive earnings surprise of 42.49% in the last four quarters. Its earnings growth estimate for 2019 currently stands at 48.61%.

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