Enphase was tumbling after releasing earnings following Tuesday’s close, and the numbers were bad enough to take other solar stocks with it.
Enphase stock tumbled 13.7% in early trading Wednesday, while SolarEdge dropped 12.7%, Maxeon Solar fell 4.2%, First Solar declined 3.3%, Sunnova was off 2.9%, and Sunrun declined 2.8%.
Enphase, which installs residential solar panels and storage solutions, posted third-quarter earnings of 65 cents a share on revenue of $380.9 million, below analysts’ expectations of 78 cents a share on revenue of $392.6 million, according to FactSet.
While revenue in the U.S. increased from the previous quarter, on the back of higher shipments to distributors as inventory returned to normal levels, revenue in Europe decreased as a result of a further softening in European demand, Enphase said.
For the fourth quarter, Enphase sees revenue in a range between $360 million and $400 million.
Guggenheim analyst Joseph Osha downgraded the stock to Sell from Neutral with a price target of $73 on Wednesday morning.
Enphase’s results and outlook underscore its competitive strength in the U.S. market, but also the challenges it is facing elsewhere, Osha wrote, calling management’s explanation for the weak results and outlook “unconvincing.”
Osha also pointed to electric vehicle maker Tesla as a possible concern for Enphase as its poses a growing threat for the storage segment of Enphase’s business. Tesla has acompact home batterythat holds energy generated by solar.
Similarly, Canaccord analyst Austin Moeller said Wednesday the underwhelming guidance outweighs continued U.S. residential rebound. Moeller downgraded the stock to Hold from Buy and cut his target price to $95 from $140.
The residential solar sector has had a tough time lately, with companies hit by high interest rates making it more expensive to finance solar installations, as well as weak demand driven by a new net energy metering system (NEM 3.0) in California.
Peer SunPower, one of the top U.S. solar companies with more than 500,000 customers and a 39-year track record, said in August it would sell or wind down its operations. Another large residential solar company, Titan Solar Power, also abruptly filed for bankruptcy in June.
The sector exception is solar panel maker First Solar, which benefited hugely from tax credits under the Inflation Reduction Act (IRA) and has had an uptick in its profits and share price.
Enphase’s results suggest the U.S. market is improving but the European business remains under pressure, Evercore analyst James West wrote in a note Wednesday.
“The overall solar market outlook within the U.S. seems to be constructive,” West said, pointing to the company’s belief that lower interest rates, investment tax credits, and higher power prices will all contribute to 2025 growth.
While the recovery is slower than expected, West still has confidence in Enphase in the longer term and reiterated an Outperform rating on the stock but lowered his target price to $125 from $133.
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