I’ve been warning readers away from oil stocks for months. My list of “7 Low-Rated Stocks to Sell Before They Drag You Down” is a veritable who’s who of the oil industry. However, that doesn’t mean all energy stocks are to be avoided. On the contrary, there are some very impressive performers in the energy sector, especially alternative energy companies. Enphase Energy (NASDAQ:ENPH) is a great example. This California-based solar energy company gets an A-rating. ENPH stock has posted massive growth over the past two years and the future looks bright.
Although the company recently saw a dip in its stock price, the reason was due to a false, self-interested report from a notorious short seller. The analyst community has supported Enphase through this period and it has since recovered much of its losses.
Here’s why Enphase Energy still rates as an ‘A’ in my Portfolio Grader, and why you should be looking closely at shares for your own portfolio.
What Does Enphase Energy Do?
Enphase Energy specializes in solar power inverters. These critical components take the power generated by photovoltaic solar panels and convert it to AC current that can be fed into the electrical grid. Enphase has sold more than 27 million inverters in over 20 countries.
The company is taking the next step in its strategy to become an even bigger part of solar energy adoption. It is now taking pre-orders on its new Ensemble energy storage solutions. These are big battery banks to store unused solar power, keeping homes running when the sun goes down. This move puts Enphase in direct competition with Tesla (NASDAQ:TSLA) and its Powerwall home battery.
How Strong Is Its Market?
There is a big push nationwide toward solar power adoption.
Brian B. Johnson, is an assistant professor of Clean Energy and Electrical & Computer Engineering at the University of Washington. When his school partnered with Enphase for a campus solar grid project, he wrote: “More than 100 municipalities in the U.S. have established directives or portfolios that target 100% renewable integration.”
In 2019, the solar industry in the U.S. grew by 23% with 13.3 gigawatts of generating capacity added. In all, solar accounted for 40% of all new energy generating installations in America for that year — its highest share ever. Industry projections have installations rising dramatically in 2020 (up 47% compared to the record-breaking 2019) and continuing to grow in 2021.
Here’s the thing. Alternative energy is on the rise, while fossil fuels are falling out of favor. Rising oil prices used to be the trigger that spurred adoption of alternatives. Conversely, falling oil prices would result in alternative energy stocks feeling the pain. Now, climate change and environmental concerns are increasingly more important. Oil prices fluctuate, but the push for change — with mandates like the 100 U.S. municipalities targeting 100% renewable integration — only grows stronger.
That’s a big reason why we’re seeing a strong performance in 2020 from alternative energy stocks, despite record low oil prices. That resilience is on display in a broad range of alternative energy companies from Enphase to Plug Power (NASDAQ:PLUG), another A-rated stock posting impressive numbers.
Enphase Energy Stock Performance
ENPH stock had some rough years in the previous decade, but since 2018, things have been clicking for the company and ENPH stock has been on fire. Trading below $2 per share as recently as January 2018, Enphase ended 2019 trading above $26. It closed at an all-time high of $67.04 in May, before slipping to its current level.
Even after giving up some of those big gains from May, the stock is up 55% so far in 2020. It’s difficult to argue against that kind of performance, especially in a year that has seen so many stocks struggle.
Bottom Line on EMPH Stock
High growth stocks are often subject to more scrutiny than others, and rightly so. In the case of Enphase Energy, that scrutiny includes a claim of financial shenanigans filed this month by a short-seller. That claim was quickly refuted by multiple analyst firms, although it did contribute to the recent slide in ENPH stock. InvestorPlace contributor Chris Tyler has the details on that drama if you want to learn more.
The bottom line on Enphase is that the company is in a good place right now, and for the foreseeable future. Solar installations in the U.S. hit record highs last year, and they’re projected to set new records again this year, and in 2021.
Climate change is pushing adoption these days, not high oil prices. So even with an oil industry that’s on its knees with low prices not seen in years, it’s not weakening demand for alternative energy.
Enphase Energy shares have been a little volatile, but despite that they have delivered impressive growth over the past two years. Even after the recent slide, ENPH stock purchased at the start of 2018 has increased in value by nearly 1,780%. It won’t be able to continue that pace, but all signs point to growth continuing.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.