Key Takeaways
- Enphase shares fell 20% after the company guided fourth-quarter revenue to $225 million to $255 million, well below the $300.5 million analysts expected.
- Even after accounting for a planned inventory cut, Enphase expects sell-through to fall 10% from the third quarter, and its CEO sees no meaningful recovery in U.S. demand.
- Enphase’s solid-state transformer for AI data centers won’t ship commercially until 2028, so it can’t make up for the slump any time soon.
- The stock looks cheap on forward earnings, but those estimates look likely to fall.
Enphase Energy (ENPH) is down 20% in premarket trading this morning after it guided fourth-quarter revenue far below what Wall Street expected.
CEO Badri Kothandaraman didn’t sugarcoat it on Tuesday’s call: “We are not seeing any meaningful recovery in the U.S. demand.”
What exactly happened
Enphase reported third-quarter results after Tuesday’s close:
- Revenue of $293.3 million, down 29% from a year ago and short of the $305.2 million analysts expected
- Non-GAAP EPS of $0.41, against $0.50 expected
- U.S. sell-through up 5% from the second quarter, but down 35% year over year
- Fourth-quarter revenue guidance of $225 million to $255 million, against $300.5 million consensus
Oppenheimer and Roth Capital downgraded the stock this morning.
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The guide is worse than it looks
The $240 million midpoint includes about $51.2 million of safe harbor revenue (equipment customers buy early to lock in tax credits), down from $85 million in the third quarter. Enphase also plans to ship about $190 million of product against $210 million of expected sell-through, to drain channel inventory.
The inventory cut is temporary, but the guide also has sell-through falling 10% from the third quarter as high interest rates and the expired Section 25D tax credit weigh on homeowners.
That’s on top of revenue that already fell from $2.29 billion in 2023 to $1.47 billion in 2025, with analysts expecting just $1.18 billion this year…
This guide puts 2026 closer to $1.1 billion, so I’d expect that estimate, and likely 2027’s, to come down.
The data center bet is years away
Enphase is pitching its IQ Solid-State Transformer for AI data centers, and its customer and partner pipeline more than doubled this quarter to over 50. But pilots don’t start until 2027, and commercial shipments until 2028.
Until then, it has $931.8 million in cash and marketable securities, though operations generated almost no cash last quarter.
The stock does look cheap: 15x forward earnings at Tuesday’s close, against a five-year average of 33x, and closer to 12x after today’s drop, near its five-year low…
My take: I wouldn’t buy this dip yet. Those earnings estimates are likely to fall after a guide this weak, and if they do, the stock is less cheap than it looks.
Of course, a megawatt-scale transformer demo by year-end could revive the data center story, and fourth-quarter results early next year will show whether sell-through has found a floor.
So what is Enphase stock actually worth?
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