Will Enphase Energy Stock Drop Under $40?

Enphase Energy (NASDAQ: ENPH) is a leading residential solar energy solutions provider, leveraging microinverter technology for efficient energy conversion and offering integrated solutions for solar, storage, and EV charging, as well. Enphase’s technological edge enables it to command a price premium for its microinverters compared to traditional string inverters. That said, Enphase has been navigating a tough rooftop solar market, which has struggled to gain momentum since interest rates rose in 2022.

What’s More To This? With a market capitalization of $8 billion, Enphase has lost 15% of its value year-to-date. Investors should be aware of the company’s sensitivity to economic downturns, as evident in the 2020 Covid crisis when its stock plummeted by approximately 60% in a few quarters. This historical precedent raises concerns that Enphase’s current share price of around $60 could potentially drop below $40 if similar market conditions recur. However, for investors who seek lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative, having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

Image by Markus Spiske from Pixabay

Why Is It Relevant Now?

Enphase’s proprietary technology and market dominance make it appealing, but the overarching economic uncertainties in the U.S. pose a considerable risk that investors should factor in. What risk is that?

Clean energy stocks face uncertainty due to the potential repeal of the Inflation Reduction Act (IRA) incentives and inflation concerns under Trump’s tariff and tax cut policies, exacerbating existing struggles from high interest rates. As detailed in our macroeconomic analysis, these factors could potentially push the U.S. economy into turbulence or even recession.

The economic challenges are exacerbated by heightened geopolitical tensions, fueled by the Trump administration’s assertive foreign policy. Ongoing conflicts, such as Ukraine-Russia, and increasingly uncertain trade relationships, including renegotiations with traditional allies like Canada and Mexico, contribute to a complex and risky environment for investors.

How resilient is ENPH stock during a downturn?

While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

• ENPH stock fell 20.4% from a high of $336.00 on 28 November 2022 to $267.38 on 28 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock has yet to recover to its pre-Crisis high
• The stock has continued lower since the end of 2022 and currently trades at around $60

Covid Pandemic (2020)

• ENPH stock fell 59.4% from a high of $59.09 on 23 February 2020 to $23.99 on 18 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 11 May 2020

Protecting Wealth

In summary, it also doesn’t help that Enphase’s stock is still expensive; it trades at almost 6x last year’s sales and close to 77x last year’s earnings. Enphase’s financial performance was particularly dismal last year, with revenues plummeting 42% and earnings per share dropping a large 76% year-over-year. Given this growth deceleration and the broader economic uncertainties, ask yourself the question: do you want to hold on to your Enphase stock now, will you panic and sell if it starts dropping to $40, $30, or even lower levels? Holding on to a falling stock is never easy. Trefis works with Empirical Asset Management — a Boston area wealth manager — whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

[1] Returns as of 3/7/2025
[2] Cumulative total returns since the end of 2016

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