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Enphase Energy Inc., a solar equipment manufacturer, witnessed a decline in its stock as the company reported reduced revenue due to a “substantial” drop in demand in the United States and Europe, a trend expected to persist into the coming year.
In a statement released on Thursday, the company disclosed that its third-quarter sales fell short of expectations and were down by 13% compared to the same period last year. The company also noted that US revenue had fallen by 16% from the previous quarter. The decline in US revenue was attributed to higher interest rates and recent changes in California’s policies regarding compensation for homeowners selling excess electricity back to the grid. European sales suffered an even more significant drop, with a 34% decrease from the previous period.
Furthermore, Enphase projected fourth-quarter revenue to be in the range of $300 million to $350 million, significantly below the consensus estimate of $577 million. Following this announcement, Enphase shares experienced a 17% decline in after-market trading.
This news arrives amidst a substantial selloff affecting the solar sector. In recent weeks, shares have experienced a downward trend as concerns grew over the potential impact of high interest rates on sales of residential and commercial solar projects. Enphase specializes in manufacturing microinverters and batteries designed to complement solar panels.
Enphase’s Chief Executive Officer, Badri Kothandaraman, expressed optimism that demand would begin to recover in the second quarter of 2024. Kothandaraman highlighted that the European market is working through an oversupply of equipment, which resulted from increased orders for solar arrays after Russia’s invasion of Ukraine and the subsequent surge in natural gas prices. During an earnings discussion, he stated that the US market, excluding California, is already showing signs of stabilization. He also believes that sales in California will recover as utility rates rise, and installers adapt to the new compensation regulations to attract potential customers.
“The second half of 2024 has great promise,” Kothandaraman stated during a phone interview. “We’re not waiting for the market to come back. We’re diversifying into other countries. We’re introducing new products.”
