Piper Sandler is optimistic again on Enphase Energy , saying that the company’s U.S. business is “not as bad as feared.” Analyst Kashy Harrison upgraded the shares to overweight from neutral. His price target of $255 implies shares gaining 22% from Friday’s close price. The firm’s upgrade comes after it downgraded Enphase shares to neutral in January 2023. The previous downgrade was due to concerns that U.S. residential demand would significantly weaken. However, Harrison said in a Sunday note that “since then, based on commentary from the publics and discussions with privates, Q1 originations were overall better than we previously feared.” “In our view, decelerating US coupled with significantly more international momentum than we anticipated earlier this year may drive ~40% top-line growth in ’23,” Harrison added. “And given the combination of a rising higher margin IQ8 mix, a less challenging operating environment, and manufacturing credits (assuming similar accounting treatment as FSLR), we believe EBITDA margins could approach the mid-30’s during ’23 (vs. 31% in ’22),” the analyst continued. IQ8 refers to Enphase’s microinverter which converts DC power to AC power. ENPH YTD mountain Enphase Energy stock Harrison believes Enphase’s earnings margins could reach the 40% range as the company ramps up its production and harvests credits from the Inflation Reduction Act. To be sure, he noted that an unexpected declaration in the company’s international expansion is a risk to his optimistic outlook on the stock. Enphase shares have dropped 21.1% in 2023, but have gained more than 9% over the past 12 months. The stock was up 1.7% during premarket trading on Monday. —CNBC’s Michael Bloom contributed to this report.
