Enphase Energy slumps as lukewarm US demand weighs on revenue forecast

(Reuters) -Shares of Enphase Energy slumped nearly 11% on Friday, after the solar inverter maker’s third-quarter revenue target fell well short of analyst estimates due to weak demand.

Appetite for solar equipment has been tepid in the United States due to lukewarm demand in states such as Texas and Arizona where cheaper electricity prices make the economics of residential solar less attractive.

The Fremont, California-based company forecast revenue between $550 million and $600 million for the quarter ending Sept. 30, compared with analysts’ estimate of $746.5 million.

Analysts said the lower third-quarter forecast was expected given the tempered U.S. demand and excess inventory issues, but the “magnitude of the outlook shortfall was surprising” and will likely continue to weigh on shares in the near term.

At least eight brokerages cut price targets for the company and it was the worst performer among S&P 500 stocks.

“We are assuming the same level of uncertainty continues going forward. Therefore, we are taking aggressive and prudent actions in the U.S. to manage down the channel inventory,” said Enphase Energy CEO Badrinarayanan Kothandaraman.

Evercore ISI analysts said the company’s U.S. business is taking a one-time correction in its inventory levels in the third quarter, but growth in European markets is accelerating.

However, analysts at Wells Fargo said they expect U.S. market slowdown to continue into next year, and forecast U.S. inverter shipments to decline by 25% year-over-year in the fourth quarter and 28% in the first quarter of 2024.

Enphase also announced a new $1 billion share buyback plan, which failed to stem the share selloff.

Shares of rival SolarEdge Technologies Inc, which is expected to report results on August 1, slid 3.2%.

(Reporting by Medha Singh and Mrinalika Roy in Bengaluru; Editing by Krishna Chandra Eluri)