BMO Capital downgraded shares of Enphase Energy (NASDAQ:ENPH) to Market Perform from Outperform in a recent note, with analysts cutting the price target to $148 from $175 per share.
Analysts told investors that finding a bottom in the U.S. residential solar market is "more elusive than expected."
"The trough in U.S. residential solar demand appears to be deeper than we had anticipated and timing of recovery uncertain," the analysts declared.
"Our latest update to our U.S. inverter demand assumptions implies only modest 2% y/y revenue growth, and we don't expect U.S. inverter demand to get back to 2022 levels until 2025-2026," analysts added.
BM's 4Q 2023 and 1Q 2024 revenue estimates are now below 3Q for ENPH. Analysts explained the firm "never assumed a 'hockey stick' like recovery for ENPH revenues in either 4Q and 1Q but had previously estimated revenues flattish to the midpoint of ENPH's 3Q guidance." However, they now believe it is more likely revenues could be lower in 4Q and 1Q.
Despite the negatives, BMO said ENPH is still a great company, and they see this as a temporary demand decline and not a competitive issue. Even so, the firm needs more evidence demand has bottomed.