Enphase Energy (ENPH) has been rated "Neutral/High Risk" by Citi, with a revised target price of $88, down from $99, reflecting a cautious outlook amid disappointing guidance and storage market concerns. The stock was trading at $78.50, down 14.89% from the previous close. Enphase's Q3 2024 revenue of $380.9 million missed both Citi's estimate of $406.2 million and consensus of $390.2 million, primarily due to earlier-than-expected under-shipments in the EU and the impact of SPWR's bankruptcy. Despite robust gross margins of ~50% and improving trends in the US, the company faces challenges in meeting its $450-$500 million quarterly revenue target, with EU revenues trending $40 million lower.
Citi notes that "forward estimates need to be lower and valuation appears stretched," as the company guides for flat Q4 revenues of $380 million, missing consensus by ~12%. The guidance reflects a lack of storage re-stock and continued EU under-shipments, partially offset by US growth. Enphase's market share in NEM 3.0 systems in California has increased to ~50%, and the company anticipates cost savings on its fourth-generation storage product, making it competitive with Tesla's Powerwall 3.
Citi's valuation is based on a blend of 20x 2025 EBITDA, 28x 2025 EPS, and DCF analysis, with a WACC of ~8% and a terminal growth rate of 5%.