Enphase Energy (NASDAQ:ENPH) stock on Tuesday was the top percentage gainer on the S&P 500 (SP500), as analysts reacted favorably to the solar equipment maker’s announcement of layoffs and other restructuring actions.
Shares of ENPH rose as much as 9.1% to $135.36, and were last up 7.2% in afternoon trade. They are on track to post a five-day win streak.
Fremont, Calif.-based Enphase (ENPH) after hours on Monday disclosed in a regulatory filing that it would reduce its workforce by about 10%, impacting about 350 contractors and employees.
The company also said it would cease contract manufacturing operations at two locations in Timisoara, Romania and in the U.S. state of Wisconsin. ENPH’s global capacity is expected to reduce to about 7.25M microinverter units per quarter from 10M.
KeyBanc Capital Markets said the restructuring plan was a “step in the right direction.”
“We see this plan as a positive step toward weathering market conditions, as persistent overcapacity continued to hurt the industry in 2023 with limited visibility as to when the conditions may improve. We note that our 2024-2025 estimates are below the Street and reflect a degree of conservatism with regard to near-term market conditions,” KeyBanc analyst Sophie Karp said in a note on Monday.
JPMorgan on Tuesday said it viewed Enphase’s (ENPH) announcement “favorably,” and bumped up its year-end 2024 price target on the stock to $143/share from $125, representing a 15.3% upside to ENPH’s last closing price.
The restructuring “will focus the company on the core U.S. market during the current global residential solar industry downturn, as well as maximize potential U.S. Inflation Reduction Act 45x manufacturing credits, though we believe it does potentially signal weaker than expected near-term growth prospects internationally,” JPMorgan’s Mark Strouse said.
Enphase’s (ENPH) announcement came after the company provided dismal current quarter guidance in October which prompted several analyst downgrades. ENPH on Monday kept its Q4 outlook unchanged.
JPMorgan trimmed its estimates on Enphase (ENPH), now seeing the company earning $3.85 per share for full year 2024 on revenue of $1.762B from $3.98 and about $2B previously. The consensus earnings per share estimate is $4.20 on revenue of $1.95B.
Mizuho Securities on Tuesday said ENPH’s decision to stop manufacturing operations in Romania and Wisconsin and redeploy equipment located there to existing locations in South Carolina and Texas was probably driven by tax credit reasons.
The decision likely reflected “favorable manufacturing tax credit guidance from the Treasury which allows ENPH to earn 11c/Wac manufacturing tax credits on U.S. sales and potentially even for exports. Planned manufacturing capacity 7.25m units, below prior 10m, with 5m units manufactured in the U.S. We estimate fully ramped ENPH could earn $118m/qtr in net benefit from 45X tax credits,” Mizuho analyst Maheep Mandloi said.
Wall Street analysts and SA Authors rate Enphase (ENPH) stock Buy. Seeking Alpha’s Quant rating on the stock is Sell.