Enphase Energy Pre-earnings Analysis

Enphase Energy Pre-earnings Analysis

Chart done on daily timeframe. Enphase Energy is set to report earnings today and markets are expecting a fairly large move based on this week’s implied volatility reading. The solar company is experiencing the same pains the solar industry is seeing as a whole; their stock has been cut in half over the last 12 months as rising interest rates take a toll on their revenue and bottom-line, which will likely continue to be the case this quarter.  Hopes of an interest rate cut this year are diminishing amongst investors so their impact on company growth, especially companies that rely heavily on borrowing, will continue to take its effect. ENPH saw a significant decline in net income from the start of 2023 to the end of 2023, reporting only 21M in profits in Q4. Analysts are estimating that number will once again be cut in half to about 10M this quarter, moving further south. 

Given the fact that this young company doesn’t yet pay any dividends, it will be harder and harder to justify holding it over a long period of high interest rates. Investors are seeing this company eat away at their portfolios and another bad earnings to start the year may set a bad tone. Revenue has stayed attractive, but profitability is key, so that will be the main focus this quarter along with guidance. 

Option chain analysis:

ENPH’s options that expire on April 26th currently reflect an implied volatility reading of 185%, which translates to about a $16 move from the underlying stock. Whether that’s bullish or bearish will depend on the results, but based on the trend, it will likely be to the downside. 

Take note that this week’s IV is extremely high, which means these contracts are at risk of being crushed to both sides if the stock doesn’t move large enough following the report. May 17th may be a better expiration date as it only readings a 90% IV.