Enphase
| Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | |
|---|---|---|---|---|---|
| Revenue | 724652 | 634713 | 530196 | 441292 | 412719 |
| Gross margin | 43.80% | 42.90% | 42.20% | 41.00% | 40.20% |
| Operating income | 229389 | 193962 | 152412 | 114529 | 97725 |
| Net income | 212389 | 175513 | 149852 | 109670 | 102779 |
| Diluted EPS | $1.51 | $1.25 | $1.07 | $0.79 | $0.73 |
| 14.17% | 19.71% | 20.15% | 6.92% | ||
| Y over y 2022 | 75.58% | ||||
| y over y 2021 | 46.24% |
Current free liquid assets roughly a billion dollars.
The IQ8 Micro inverters are ramping up and are now 55 percent of production. So a double the percentage of IQ converters is unlikely. On the other hand the total numbers with higher gross margins are likely to increase a lot.
A big deal is the Bi-direction EV charging that has been engineered from the IQ8 inverter.
Now the bad news. The really bad news. Enphase has consistently hit it numbers to the high side of its estimates by about 4 million dollars. They have a slowing trend in the last 3 quarters and the slowing is expected to continue and be more pronounced in the first quarter. Looking over the numbers we can expect Enphase to have about 744 million in revenue next quarter. That is only an increase of about 20 million from this quarter and that works out to about 3 percent growth.
UHG!
But wait there’s more!
There are three reasons for this slow down. One is Enphase is moving to a new battery and they are not selling the old ones, this may be due to macro factors. Batteries are expensive and interest rates are up. But there are some others, the second is the supply chain has slowed down, the installers are thinning out inventory and attempting to hold less on hand. Third while NEM 3.0 (The California law that has impacted solar in California) is a net positive for Enphase, the sudden implementation will have a negative impact for at least one quarter.
Here is the quote from the conference call that explains about NEM 3.0 and about the batteries.
Yeah. On NEM 3.0, we aren’t really seeing any pull forward right now. But in talks with few installers in California, both big and small, like what I said, the originations are up strongly. They are all quite optimistic.
And maybe we will see something soon that’s why I talked about an optimistic Q2. But so far, we haven’t seen any pull-forward demand yet. Now on talking about NEM 3.0 in general. NEM 3.0 is going to be incredibly positive for us.
Because NEM 3.0 – I mean, just so everybody gets it, I’ll talk about NEM 3.0, the features of NEM 3.0. Basically, the – previously, the import and export rates were the same. So therefore, when you export an electrons with the solar system, didn’t really matter. As long as you exported, it got directly subtracted from what your input.
That’s why it’s called net metering, and that was net metering 2.0. With NEM 3.0, it matters when you export these electrons. So you have 24 hours a day, 365 days a year. So basically, 8,760 data points, and there is an export rate for each of those data points.
Each of those hours, there is an export rate. But what it works out to be is if you are interested in a pure solar system, your payback dropped understandably from, let’s say, five years, it increases actually to something like seven or seven and a half years with the pure solar system. But the moment you add batteries, you can add batteries in steps of 5-kilowatt hour, 10-kilowatt hour, 15-kilowatt hour. The moment you add batteries, that payback comes right back into that five- to six-year time, to that five- to six-year period.
That is the stock difference with NEM 2.0. With NEM 2.0, the grid was the value. Batteries didn’t have an ROI because batteries were primarily for resilience only. With NEM 3.0, batteries are going to be financially attractive.
But it is complex. NEM 3.0 is definitely complex. So the installers need to demystify it for the homeowners. And that’s where an engine like solar draft and other engines come in, where if we are able to show this to the homeowner, we think it is a no-brainer.
The homeowner will always pick solar plus storage. Now to add some more variance to it. Germany, for example, if you look at Germany, this is exactly what happened. They all counted as a feed-in tariff where – so that is not 8,760 different rates for those hours, but they have one rate, which is a much reduced rate.
And therefore, self-consumption becomes the norm in Germany. No one thinks about exporting solar, right? And that have an 80% attach there. This is going in the same direction, going in the same direction. In Germany, you have grid-tied batteries because power doesn’t go out there much.
It goes out maybe once a year. We have grid tied battery. Grid-tied batteries means the installation is simpler, and it is cheaper. I’m not sure whether California will go in that direction.
Time will tell because – we do have some color. We do have resilience issues as well. But I’m sure markets will evolve a little in that direction, too. So bottom line, we are incredibly optimistic.
We got the right batteries for it with the third-generation battery. We got the modularity, which I think will start becoming popular. Grid-tied may become popular, but we’ll be ready to do either grid-tied or off-grid, on-grid with backup. The things that are looking, we like NEM 3.0.
Of course, we didn’t like the fact the stepdown happened right away. But I think in the long term, it’s an OK decision.
My take is that over the course of the next quarter and immediately after the first quarter conference call the stock will present some very attractive buying opportunities. (It is going to drop a lot). On the other hand, I think this is a well-run company in a very fast-growing market. I have been burned before in trying to time the market on good companies.
I will probably take a super small position unless I am talked out of it.