Solar stocks slid again on Friday, the first trading day after Enphase Energy published earnings with a gloomy outlook for the rest of the year.
ENPH stock fell 14.7% to 82.09 on the stock market today. Late Thursday, the company reported a 13% yearly decrease in revenue to $551 million. Enphase Energy also estimated fourth-quarter sales to fall between $300 million to $350 million. The midpoint of that range, $325 million, is well short of the $579 million analysts were expecting prior to the report, according to FactSet.
"We have seen a substantial demand reduction in Europe," Chief Executive Badrinarayanan Kothandaraman said on Enphase's earnings call. "We have also seen the U.S. market continue to fall, driven by California."
The warning pressured solar stocks as a whole. The Invesco Solar ETF, which tracks the industry, fell 4.5%, furthering a rough year for solar companies.
Enphase Shares Down 65% in 2023
Enphase shares have fallen roughly 65% this year. The California-based company is a leading provider of microinverters that convert direct current electricity to alternating current, as well as boost overall energy production from solar panels. The company also designs battery systems. ENPH shares gained 45% last year.
But earnings have declined in recent quarters. Earnings of $1.02 per share for the third quarter was off 18% from the same period last year.
The solar market has been challenged by rising interest rates and concerns about the broader economy, particularly in Europe. Also, California recently changed the way it calculates the value of excess solar energy put back into the grid, a process called net-metering. The so-called Net-Metering 3.0, or NEM 3.0, provides lesser credits.
"We are managing through a slowdown in our overall demand," Kothandaraman said. "In the U.S., it is due to high interest rates and NEM 3.0. In Europe, it is due to broad macroeconomic conditions. Despite this, we are very bullish about our business long-term."
As evidence, Kothandaraman pointed to government incentives to boost solar production and growing adoption of electric vehicles. For instance, the U.S. Inflation Reduction Act passed in 2022 includes billions toward solar development and prioritizes U.S.-based manufacturers for extra tax credits.
Solar Stocks: Worst-Performer On MarketSmith
The company is not projecting demand recovery until the second quarter of next year, however.
In the meantime, solar stocks are hurting. The 25 solar stocks tracked by IBD MarketSmith in the Energy-Solar industry group have already lost a cumulative 44% in 2023 as of Thursday. The group is the worst performer among the 197 industry categories tracked by MarketSmith, based on six-month price performance.
SolarEdge fell in sympathy with Enphase, down 7.7%. SEDG stock fell 30% last Friday after similarly warning of issues in Europe.
Residential solar developer Sunrun fell 9%. Utility-scale manufacturer First Solar lost 5%.
Further, The Invesco Solar ETF has lost about 40% this year.
