It's only been three weeks since we called Enphase Energy Inc. (NASDAQ: ENPH) an "under-the-radar energy stock" with NASDAQ: ENPH" target="_blank" rel="noopener">a ton of potential, and we're already being proved right. Having spent almost all last year being beaten down by the bears, the end-of-year rally starting in November has added fresh fuel. 

The solar equipment stock reported its Q4 earnings earlier this week. While it missed analyst expectations for earnings and revenue, the bullish outlook shared by management did more than enough to make up for it. 

Revenue was still down 58% yearly, with revenue from Europe dropping 70% from the previous quarter. However, anyone involved in Enphase knows it's buying into the recovery story that's just starting. 

Much of the downside has been industry-specific, with residential solar demand struggling to return to its former highs. The global cost-of-living crisis has recently exacerbated this downturn, with consumers tightening their belts and trying to make ends meet. 

Bearish headwinds

When times are tough, alternative and renewable energy is still a luxury, so people will return to the old reliables, oil and gas. But with interest rates set to fall and consumer confidence at multi-year highs, the outlook is suddenly a lot more rosy for Enphase. Enphase shares have only just started bottoming out after their 80% drop. 

With the factors in place to drive NASDAQ: ENPH" target="_blank" rel="noopener">a return in demand, this suggests there's a ton of upside potential that Wall Street is already starting to catch onto. Enphase shares jumped almost 25% on Wednesday off the back of comments from CEO Badri Kothandaraman, who told investors that "we think Q1 could be the bottom quarter." They're already starting to see signs of recovery in Europe and expecting the non-Californian states to "bounce back quickly." 

The team at Oppenheimer immediately upgraded their rating on Enphase shares due to the improved outlook, upping them to an "outperform" rating with a $133 price target. It echoed the move from Roth MKM, which boldly reiterated its "buy" rating ahead of this week's report. Roth MKM gave Enphase shares an even higher price target of $140, which, even accounting for this week's jump, points to an immediate upside of at least 20%. 

Getting involved

It's always interesting to see how much weight Wall Street gives to expected future performance versus actual past performance. This is especially true for growth stocks like Enphase, which have all their potential ahead of them and are yet to be realized. With equities, in general, enjoying a great couple of weeks and with investor sentiment firmly in the risk-on camp, there's a lot to like about Enphase right now. 

It is worth pointing out that the stock struggled to build on Wednesday's gains in yesterday's session, so staying above the $115 level ahead of the weekend will be critical. If it starts giving up these gains, the recovery story becomes much harder to visualize, and it probably means an earnings report that completely smashes expectations is needed to turn things around. 

But in the meantime, investors should look for shares to continue consolidating from this week's gains, with fresh upward moves likely to form in the coming sessions as hopes build for a bumper year. We've seen how quickly Enphase's revenues, and in turn, its shares, can take off when the conditions are right, and it's starting to look like we're getting to that point now.