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Enphase Energy

What it does: Enphase is a US solar energy company leading in facilitating the supply and storage of clean energy.

By Oliver Rodzianko. I bought Enphase Energy (NASDAQ:ENPH) stock in March, and I intend to add to my position in April. I consider this a very rare opportunity to buy the shares at a 67% discount from all-time high prices.

The World Economic Forum outlines a potential compound annual growth rate of 20% for solar deployment until 2050. It claims solar to be the fastest growing energy technology in all history.

However, this is a long-term investment, and I think there could be short-term losses before substantial gains.

Also, the company is highly subject to regulatory shifts. Trump getting into the White House in the upcoming election could see negative pressure on US clean energy companies if he shifts attention toward policy favourable to fossil fuels.

Nonetheless, I consider this one of the best investments in my portfolio. I think it’s truly contrarian, and I believe I’m right about the long-term potential here.

Oliver Rodzianko owns shares in Enphase Energy.

MicroStrategy

What it does: MicroStrategy develops mobile and cloud-based software for the provision of business intelligence services.

By Mark David Hartley. MicroStrategy (NASDAQ:MSTR) shares are up 507% over the past year and 120% this month. CEO Michael Saylor’s bet on blockchain assets seems to be paying off – finally. Many believe such a large investment in a nascent and speculative technology puts the company at high risk, yet he seems happy to take those odds. 

The company became profitable this year for the first time since 2020, with equity that’s increased almost five-fold since March 2023. However, with a price-to-earnings (P/E) ratio of 63.2, the share price is considered heavily overvalued. Some analysts estimate the $1,565 shares to be worth only $388. Others predict a 12-month price target of $1,810.

Opinions on the stock are extremely polarised, with some foreseeing massive gains while others predicting collapse. While I typically err on the side of caution, in this rare case I feel the reward could be worth the risk.

Mark Hartley owns shares in MicroStrategy.

Oddity Tech

What it does: Oddity analyses skin tone and beauty needs through a phone camera and uses machine learning to match consumers with products.

By Ben McPoland. I like the look of Oddity Tech (NASDAQ: ODD) right now. The company operates two fast-growing digital brands: Il Makiage, which sells cosmetics, and SpoiledChild, which focuses on hair and skincare products.

The firm only went public in July 2023 and either or both brands could fall out of fashion as new trends emerge. That’s a risk.

However, Oddity is growing very quickly and is already profitable. In 2023, revenue surged 57% to $509m as the company beat its own guidance in every single quarter. Adjusted EBITDA grew 173% to $107m.

It has collected 2bn data points from over 50m unique customers. From this data, the firm says artificial intelligence produces superior product recommendations versus a human eye. This differs from the beauty industry’s trial-and-error model.

Its proprietary skin health molecule, Fibroquin, showed stronger efficacy than retinol in a clinical trial. Unsurprisingly then, customer reviews are overwhelmingly positive.

Management says both brands are on course for $1bn+ in sales by 2028 and it plans to launch more in different categories.

Trading at 25 times forecast earnings and with a small $2.5bn market cap, I recently bought the stock.

Ben McPoland owns shares in Oddity.  

The post Best US stocks to consider buying in April appeared first on The Twelfth Magpie.

Could there be more strong gains in the future – and should I buy now?

Soaring price

Why has Enphase Energy stock taken off the way it has?

The firm’s solar inverters have made it popular with investors looking for renewable energy shares to buy. But the company is not just a pipe dream based on long-term trend forecasts. It has a sizeable and fast-growing business. Revenues last year were over $2bn and have grown over 900% in the past five years. Meanwhile, the company made almost $400m in net income last year.

Not only does that mean it has a net profit margin in the high teens, it also means that the company trades on a price-to-earnings (P/E) ratio of 76. That is far higher than I would normally consider. But if earnings keep growing at their present clip, the prospective P/E ratio could be markedly lower.  

Future outlook

Last year, net income more than doubled. Could things get even better from here for the share price?

Deutsche Bank seems to think so. Last week, the German bank raised its target price for Enphase Energy stock. One of the drivers for a possible price increase Deutsche analysts pointed to was an upcoming increase in the solar firm’s production capacity. New US contract manufacturing capacity is due to come online this year.

The company benefits from proprietary technology and a lean business model that generates a gross profit margin of 35%. It has built a network of installers that I think could help it sell and maintain systems for many years to come, helping it expand its already sizeable customer base.

Is Enphase Energy stock a bargain?

I definitely think there is a lot to like about the company and its business model.

That said, I do see risks too. Solar energy is a fast-developing field. That is good in terms of ongoing demand growth, but I also expect it to translate into tougher competition in future.

On top of that, I see risks in Enphase’s asset-light business model. Outsourcing manufacturing can help build scale without incurring large capital expenditure. But it often also means a company ends up having less control over its supply chain. If a contract manufacturer increases prices, for example, that can hurt profitability.

Despite those risks, I think Enphase has great potential. Its business model has already proven itself, and I think its addressable market is set to grow strongly in coming years. That could be good for revenues and profits.

But given its current valuation, I do not see Enphase Energy stock as a bargain. To justify its current price, the company needs to blow out the lights in coming years. That could well happen, but I feel the valuation offers too little margin of safety for my tastes. So, for now, I shall not be buying.

The post Up 4,000% in five years, can Enphase Energy stock keep going? appeared first on The Twelfth Magpie.

Investors have been buying into the stock as the green technology and renewable energy drive has started to heat up. Hundreds of billions of pounds have flowed into renewable energy technologies over the past 24 months. And the trend is only accelerating.

A desire to build back better after the pandemic is pushing investors and consumers to rethink their energy habits. Rising hydrocarbon prices and supply issues are also driving changes. 

Green tech 

Enphase designs and manufactures software-driven home energy solutions. These primarily constitute solar energy solutions and home energy storage. The company is the world’s leading supplier of microinverter-based solar and battery systems. 

Put simply, this means the company’s technology allows consumers to generate solar energy and store it at home to be used later. Its latest product, which incorporates “IQ 7 microinverters“, can store 42 kWh of power. That’s enough to power most homes for more than a day. 

Demand for this renewable technology is growing. Enphase recorded revenues of $286m for 2017. By 2020, this figure hit $774m. For the quarter ending June 2021, revenues totalled $316m. That suggests the company is on track to generate $1.2bn of revenue over the next 12 months.

Of course, this could be a conservative figure with revenues growing in the double-digits on a year-on-year basis. 

The company is rapidly expanding its operations to meet global demand. The organisation is currently moving into Belgium, which it describes as the “fastest-growing solar market in Europe.” It also recently announced expansions into Italy and Brazil. 

Enphase share price valuation 

Enphase is already profitable, so it has the cash available to expand into these new markets. For the quarter to the end of June, it produced a net income of around $39m. Based on current Wall Street growth estimates, the stock’s trading at a forward price-to-earnings (P/E) multiple of 65. 

This multiple looks expensive, especially because competition is only going to grow in the solar market. Vast amounts of money are flowing into the renewable energy sector, and companies are constantly fighting for new business.

Enphase may be the leading the market today, but there’s no guarantee it’ll maintain its market position. There are also question marks over solar’s efficiency compared to other green technologies, such as wind and nuclear.

Despite these risks, I’m excited by the company’s success and its technology. As the world moves away from hydrocarbon energy, I think the demand for its solar products will continue to expand, especially among homeowners. That’s why I’d buy a speculative position for my portfolio today. Despite its recent performance, I don’t think it’s too late to buy the stock. 

The post The Enphase share price is up 500%! Is it too late for me to buy the stock? appeared first on The Twelfth Magpie.

Although my US shares are NASDAQ companies, they are also listed in the S&P 500, and because the S&P 500 is weighted based on market capitalisation, they have a heavy say on the index. It is generally thought of as the best index to value US stocks overall. If confidence is diminishing in the S&P 500, this could also spread to the index’s top companies such as Apple (NASDAQ: AAPL) and Tesla (NASDAQ: TSLA).

What is affecting the S&P 500?

As far I see it, there are two main factors causing uncertainty among US stock investors. The first is the rise in delta variant cases in the US. Infection rates are spreading by 20% week-over-week and Covid-related hospitalisations have risen 26.5% in America. As a result, this could negatively affect GDP.

The second factor follows the news that the Federal Reserve (Fed) revealed it could be reducing its monthly asset purchases this year. When this news was first revealed back in July, it caused a 2.3% decrease in the S&P 500. With the timing of Fed’s stimulus withdrawal coming closer, this might have other investors on red alert and could cause share prices to drop.

What I’m doing with my shares

Although the S&P 500 dropped to a low of 4,382 points this week and could follow this trajectory into next week, I’m not selling my positions any time soon. 

I own shares of Apple, Tesla, and Enphase Energy (NASDAQ: ENPH). None of them have had a great week in terms of their share price. 

Currently, the Apple share price has dropped by 1.5% in the last five days, reaching a low of $144.91. Apple is currently facing issues over an industry shortage of chips. The semiconductor industry was partly shut-down due to Covid-19 and is still playing catch-up. However, Apple’s recent quarterly results have been very impressive, with a 36% increase in revenue. 

The Enphase Energy share price sunk by almost 4% last week, to a price of around $166 as I’m writing. Enphase reported excellent financial results in its FY21 Q2 results with a 5% increase in revenue from Q1 to $316.1m. Enphase shares are expensive with a price-to-earnings ratio of 128.42.

The Tesla share price fell by just under 3% in the last five days. Tesla is currently facing a federal probe into its autopilot feature, with concerns over the safety of hands-free driving. This could explain the drop in price. However, the company’s financials are showing positive growth and strong revenue.

My outlook on the S&P 500 drop

For me, the important thing is to look at how a company is performing first, and then to analyse market trends as a secondary concern. It could be that these three shares will fall next week if the S&P 500 continues to drop, but this won’t dislodge my long-term dedication to these shares. Despite the drop, I’ve held these high-performing shares for a while and they are still green in my portfolio. I’ll be holding them for the foreseeable future.

The post The S&P 500 tumbled down this week. Here’s what I’m doing with my US shares appeared first on The Twelfth Magpie.