U.S. Markets close in 2 hrs 30 mins

Why Enphase Energy Inc's Shares Popped 38% Today

Travis Hoium, The Motley Fool

What happened 

Shares of microinverter Enphase Energy Inc (NASDAQ: ENPH) jumped as much as 38.4% in trading Wednesday after the company announced an important acquisition of SunPower's (NASDAQ: SPWR) microinverter business. Shares held steady with their gains throughout the day and were up 34% at 11:50 a.m. EDT. 

So what

Enphase is acquiring SunPower's microinverter business for $25 million in cash and 7.5 million shares of stock. The deal announcement says Enphase will exclusively co-develop microinverters for SunPower's residential solar panels, expecting to add $60 million to $70 million in annualized revenue in the second half of 2019 at a gross margin of 33% to 35%. However, it looks like Enphase will shut down SunPower's microinverter business after buying it, moving to its own IQ line of products instead. 

Home with rooftop solar panels.

Image source: SunPower.

The acquisition could add 20% to Enphase's revenue and bring the company close to breakeven financially. That would be an incredible turnaround from a year ago, when it looked like Enphase might not be financially viable much longer. 

Now what

Enphase is spending a lot of money to add big customers, but adding SunPower's high-efficiency solar panels to the product portfolio is a nice win for the company and gives some product validation for other buyers as well. The deal also looks like it's a win for SunPower, which is getting $25 million in cash and about $45 million in stock at today's valuation. Sometimes deals are a win-win for companies, and that looks like the case for these two solar manufacturers today. 

More From The Motley Fool

Travis Hoium owns shares of SunPower. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.