Enphase Energy (ENPH) has been rated "Neutral/High Risk" by Citi, with a target price of $71, reflecting a 13.8% expected total return. The stock closed at $62.40 on November 18, 2024. Citi's analysis follows a post-earnings discussion with Enphase's Head of IR, Zachary Freedman, highlighting a restructuring plan aimed at efficiency improvements, not influenced by recent elections. The plan includes reducing operating expenses to $75-$80 million per quarter in 2025, post-Q1, while maintaining employee incentives through cash bonuses.
Enphase's commercial and industrial (C&I) business is set to expand with the IQ9 launch in 2H25, targeting a 10GW European market. Despite SEDG's price cuts, Enphase does not plan significant price changes, viewing Huawei as a more substantial competitive threat. The company maintains a 39-42% gross margin on microinverters, deemed sustainable. Citi's valuation of Enphase is based on a blend of 15x 2025 EBITDA, 22x 2025 EPS, and DCF analysis, supported by a strong balance sheet and free cash flow outlook.
Citi notes potential risks, including regulatory changes, execution challenges in storage and commercial microinverters, and variability in IRA credits. "We believe valuation is full and that upside to estimates is presently limited," Citi states, emphasizing the stock's high volatility.