What Happened?

Shares of home energy technology company Enphase (NASDAQ: ENPH) fell 14.5% in the afternoon session after the company provided a weaker-than-expected revenue forecast for the third quarter. 

The company projected third-quarter revenue to be between $330 million and $370 million, with the midpoint falling short of analysts' expectations. While Enphase's second-quarter earnings and revenue surpassed estimates, the disappointing forward-looking guidance weighed heavily on investor sentiment. Management attributed part of the weakness to the impact of U.S. tariffs, which were expected to negatively affect gross margins by 3% to 5% in the coming quarter. The company also noted that the upcoming expiration of residential clean energy tax credits was expected to shrink the U.S. residential solar market in the following year. This news sparked broader concerns about slowing demand and margin pressures across the renewable energy industry.

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What Is The Market Telling Us

Enphase’s shares are extremely volatile and have had 46 moves greater than 5% over the last year. But moves this big are rare even for Enphase and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 15 days ago when the stock dropped 5.3% on the news that TD Cowen downgraded the stock amid broader concerns about the future of solar tax credits. 

TD Cowen lowered its rating on Enphase Energy to 'Hold' from 'Buy' and slashed its price target to $45 from $58. The firm expressed concern over the potential elimination of the 25D tax credit for residential solar at the end of 2025, which it believes will hurt demand. Analysts noted that Enphase has significant exposure to the customer-owned segment of the solar market, which would be most affected. 

Adding to the pressure, reports indicated that President Trump signed an executive order to enforce provisions that scale back tax credits for solar and wind energy, impacting sentiment across the sector. This move compounds existing challenges for the residential solar market, which is already contending with elevated interest rates.

Enphase is down 49.2% since the beginning of the year, and at $36.26 per share, it is trading 70.7% below its 52-week high of $123.65 from August 2024. Investors who bought $1,000 worth of Enphase’s shares 5 years ago would now be looking at an investment worth $587.97.

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