California solar market shows signs of recovery, Wells Fargo reports

Investing.com - California residential solar installations increased 11% year-over-year in Q1 2025, marking the first positive quarter since the implementation of NEM 3.0, according to Wells Fargo (NYSE:WFC)’s analysis of California DG stats data through May 2025. This growth comes amid significant market volatility, particularly affecting companies like Enphase Energy (NASDAQ:ENPH), which has seen its stock decline nearly 40% over the past six months according to InvestingPro data.

Battery attachment rates remained steady at 50-55%, while the cost per watt reached $5.20. In the competitive landscape, Sunrun (NASDAQ:RUN) led installer market share at 29% through its direct channel, and Hanwha Qcell dominated panel market share at 28%. For investors tracking this sector, InvestingPro reports that Enphase maintains strong fundamentals with a healthy current ratio of 1.9 and gross margins of 36.85%.

Tesla (NASDAQ:TSLA) continued to gain market share in the inverter segment, reaching 39% in May (up from 36% the previous month), outpacing Enphase Energy (NASDAQ:ENPH) at 30% (down from 32%) and SolarEdge (NASDAQ:SEDG) holding steady at 13%. Tesla’s Powerwall 3 also led the battery segment with 54% market share in April (up from 52%), compared to Enphase at 19% (down from 22%) and SolarEdge at 4% (down from 6%).

Wells Fargo noted that Tesla’s gains came despite potential headwinds, including brand challenges from CEO Elon Musk’s controversial statements and domestic content rules affecting solar and storage eligibility. The firm indicated that Tesla’s Powerwall 3 qualifies with more than 60% domestic content.

Enphase’s fourth-generation battery (IQ 10C) is rolling out commercially this quarter with an estimated installation cost of $16,100, below Tesla’s Powerwall 3 cost of $16,800 and Enphase’s previous generation cost of $19,600. Wells Fargo projects commercial sales of the IQ 10C to increase in Q3 2025, potentially helping Enphase compete more effectively against Tesla in the battery segment. With Enphase’s next earnings report scheduled for July 29, 2025, investors can access comprehensive analysis and 15+ additional ProTips through InvestingPro’s detailed research reports.

In other recent news, Enphase Energy has faced several developments that are of interest to investors. The company recently began shipping its IQ EV Charger 2 in Australia and New Zealand, highlighting its expansion in the electric vehicle market. Meanwhile, Enphase Energy’s board of directors voted to retain Thurman John (T.J.) Rodgers as a board member, despite him receiving less than 50% of votes in a recent stockholder meeting, citing his expertise in semiconductors and power electronics.

In terms of financial outlook, Citi analysts have lowered the price target for Enphase Energy to $43, maintaining a Sell rating due to concerns over the U.S. residential solar market. The analysts expressed skepticism about improvements to the Inflation Reduction Act provisions, predicting a potential 75% decline in U.S. residential solar installations next year. Additionally, TD Cowen downgraded Enphase Energy to Hold from Buy, citing concerns about the expiration of the 25D tax credit and its impact on U.S. customer-owned residential solar demand.

Furthermore, Enphase Energy’s shares saw a decline following the U.S. Senate’s advancement of a tax-and-spending bill that preserved tax credits for solar leasing arrangements but did not favor customer-owned solar systems. Despite these challenges, the company continues to innovate, as demonstrated by the launch of its new EV charger. These recent developments provide investors with crucial insights into Enphase Energy’s current position and future prospects.

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