Key Takeaways:
- Business Scale: Enphase generated $2 billion in LTM revenue, highlighting its position as a leading supplier in residential solar hardware despite an industry slowdown.
- Earnings Profile: Operating income of $207 million and a 14% margin show cost discipline that limits downside during periods of weaker installation demand.
- Price Target: Based on valuation assumptions, Enphase stock could reach $42 by December 2027 as margins recover and volumes stabilize.
- Return Outlook: This target represents 26% total upside from the current $33 share price, equal to a 12% annualized return over two years.
Before diving in, see what Enphase could be worth by 2027 using TIKR’s valuation model (It’s free) →
Enphase Energy (ENPH) designs and sells microinverters, batteries, and energy management systems that power residential solar installations across the United States and international markets.
Recent changes to safe harbor rules in 2024 helped stabilize installer economics, easing channel pressure even as the residential solar downturn continued to weigh on shipments.
The company generated $2 billion in trailing twelve month revenue, showing demand compression that matters because volumes directly influence fixed-cost absorption across its manufacturing and support base.
Operating income exceeded more than $200 million over the last twelve months which shows that cost discipline helped maintain low-teens margins despite weaker industry utilization.
With a market capitalization near $4 billion, revenue is expected to stabilize first, with a gradual recovery as residential installations normalize and storage attachment rates increase.
Despite improving cash flow and margins, the stock trades near $33, raising the question of whether valuation fully reflects Enphase’s earnings recovery path as industry conditions normalize.
What the Model Says for Enphase Stock
We assessed Enphase’s recovery potential as margins normalize, cash flow remains positive, and cost discipline supports earnings through a muted residential solar cycle.
Using revenue growth of -8.6%, operating margins of 7.4%, and a 16.0x exit multiple, the model projects upside from current levels.
The stock could reach $42, delivering a 26.2% total return, or 12.3% annually, over the next two years.
Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for ENPH stock:
1. Revenue Growth: -8.6%
Enphase revenue declined 41.9% in 2024 as higher interest rates sharply reduced residential solar installations across core U.S. markets.
The last twelve months show revenue of $1.51B, down from $2.29B in 2023, confirming the depth of the demand contraction.
Forward estimates show revenues falling from $1.46B in 2025 to $1.23B in 2026 before stabilizing near $1.34B in 2027.
This trajectory reflects delayed project financing rather than structural share loss, as Enphase maintains leading microinverter market penetration.
Expanded safe harbour agreements support installer economics, but do not fully offset near-term macro pressure.
International demand and storage attachment provide partial buffers, though volumes remain constrained by consumer financing conditions.
Street expectations point to a –8.6% revenue outlook, reflecting a gradual normalization in residential solar demand rather than a sharp cyclical rebound.
2. Operating Margins: 7.4%
Enphase generated a 13.7% operating margin over the last twelve months despite materially lower shipment volumes.
Margins peaked above 20% during the 2022 demand cycle, highlighting the operating leverage embedded in the model.
Current margins are pressured by underutilized manufacturing capacity and elevated fixed operating expenses.
Forward estimates show operating margins compressing to mid-single digits before gradually recovering as volumes stabilize.
Cost controls and workforce reductions support margin defense, though pricing power remains limited in a weak demand environment.
Storage and software-driven revenue mix provides incremental margin support but remains a smaller portion of total sales.
Market forecasts imply operating margins around 7.4%, supported by cost control initiatives but capped by a slow recovery in installation volumes.
3. Exit P/E Multiple: 16x
Enphase currently trades near a 16.5x forward earnings multiple following a prolonged valuation compression cycle.
Historical multiples exceeded 40x during peak growth years, reflecting materially stronger demand and margin visibility.
Investor caution reflects interest rate sensitivity, residential solar cyclicality, and uncertain timing of volume recovery.
Forward normalized EPS declines from $2.78 in 2025 to $2.10 in 2026 before recovering modestly thereafter.
Sustained free cash flow generation and balance sheet flexibility limit downside risk despite muted growth.
A full re-rating requires visible demand stabilization and margin expansion beyond cost-cutting.
Investor pricing assumptions support a 16.0× exit multiple, grounded in cash flow durability while reflecting skepticism around near-term growth acceleration.
What Happens If Things Go Better or Worse?
Residential solar recovery timing and margin normalization shape Enphase’s outcomes. Here is how Enphase stock might look in different scenarios through 2027:
- Low Case: If residential demand stays weak and revenue growth stays at -0.5% with valuation with 29% net income margin → 4% annual return.
- Mid Case: With stable volumes, revenue growth at -0.6% with 33% net income margin → 11% annual return.
- High Case: If installations rebound faster, revenue reaches -0.7% and net income margin of 38% → 18% annual return.
Enphase has shifted from expansion to earnings protection, positioning the business to benefit when residential solar activity stabilizes.
Reaching $42 by 2027 hinges on margins rebuilding as volumes stabilize and the stock being valued on steady earnings power rather than near-term solar market weakness.
How Much Upside Does Enphase Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
Build your own valuation model for Enphase with TIKR (It’s free) →
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
