Can This Energy Stock Still 10x Despite a Dwindling Competitive Edge?
In this clip from "The Rank" on Motley Fool Live, recorded on Feb. 7, Motley Fool contributors Jason Hall, Matt Frankel, and Taylor Carmichael discuss the future of Enphase (NASDAQ: ENPH) in the midst of a crowded industry and analyze whether its growth rate is sustainable over the long-term.
Jason Hall: Enphase is a really interesting company. It's probably best known for people that are familiar with the company for its microinverters on a solar panel, distributed solar, so you have it on the roof of your house or on top of a Walmart (NYSE: WMT) or an industrial facility, you've got solar panels. In each one of these solar panels, there has been some changes in federal code over the past few years that require panel-level power management. Not just a single inverter that takes a large group of panels and turns the DC from the panels into AC that the grid uses, but literally in each single panel. It's to protect grid workers, it's to better manage the efficiency, it's to reduce fire risks, all of those things. The bottom line is that Enphase and SolarEdge (NASDAQ: SEDG) are two companies that they still largely have a duopoly in the U.S. in that panel-level electronics. Enphase's biggest business is the microinverters, the inverters on each single panel. It also has made some efforts to get into battery storage. Disclosure, I'm actually looking at Enphase for my personal, something I'm looking to buy myself. Just wanted to disclose that I'm looking at the company. But, there's a lot of competition in that space. You have Tesla (NASDAQ: TSLA), you have SolarEdge, you have Enphase, you have Generac (NYSE: GNRC). There are a lot of companies that are in that space that it's growing into. But, it fits well with its niche, because it has a lot of relationships with suppliers and installers and manufacturers. The reason that I rated it as low as I did, is I do think as much as it has benefited from great technology, being a leader, and getting to that panel-level electronics business for solar. As much as we are going to see continued secular growth, the trend is very long term for solar, as renewables ramp up. The more deployments of energy storage is going to continue to create opportunity. It's becoming crowded, and I'm not convinced that over the long-term Enphase is going to be able to manage the margins that it's been able to get as basically a duopoly with SolarEdge in its biggest market. That's the biggest thing for me, is I think again, it's a valuation story. Are they going to be able to continue to deliver the growth rates that we've seen over the past few years? I don't know if that's going to be the case. This has been a huge winner for anybody that bought this stock four or five years ago. It has been a massive winner even with a pretty big sell-off. I struggle to know whether over the next five to 10 years, if this is going to be the stock that's going to be able to continue to outperform the market. I think there's a good chance, but I can't really rate it ahead of some of these other ones we're going to talk about.
Source Fool.com
