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Solar panels are spreading across the globe at a record pace, fueled by tax breaks and ambitious climate goals. The U.S. is installing panels fast, too—so many that solar power is expected this year to account for more than half of new electricity capacity for the first time ever. But solar stocks haven’t come along for the ride. Weakness in some key product areas, including residential rooftop systems, has sunk several stocks in the industry.
None has fallen from grace quite as hard as
Enphase Energy
(ticker ENPH), which entered the year on a six-year winning streak that included two years when the stock more than quintupled. It’s down 54% this year.
Enphase makes key components for the residential market, which is still growing but faces new challenges. High interest rates and more-stringent rules for solar panels in California have scared off potential customers and led to uncertainty in the industry.
Enphase issued a weak third-quarter sales forecast, causing the stock price to collapse so fast that it now trades at 21 times its expected earnings over the next year, the lowest level since the depths of the pandemic. A stock that normally trades at double the price/earnings valuation of the broader market is now getting just a 10% premium.
The selloff looks too steep. Enphase remains a crucial supplier of solar equipment in the U.S. and elsewhere, with a network of installers and distributors around the world. Its earnings are expected to grow 10% this year to $5.07 per share, and more than 30% in each…
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