I’m bullish on Enphase (ENPH)—a leader in microinverter-based solar systems, energy storage, and EV charging systems—because the company is poised for substantial growth in 2025 and 2026. Despite the stock’s significant downward momentum in recent years, the company appears to be nearing an inflection point, presenting an opportune moment to invest in its potential for an outsized compound annual growth rate over the next two years or beyond.
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2025 & 2026 Are Primed for Growth
I’m particularly bullish on Enphase for near-term returns. As Fiscal 2024 draws to a close, the company appears to be experiencing a year-over-year revenue decline exceeding 40%. However, the upcoming year shows promise, with the potential for approximately 35% year-over-year revenue growth. This sharp contrast positions Enphase at a significant inflection point. Much of this potential rebound is driven by anticipated improvements in interest rates in 2025, which are expected to stimulate economic demand.
This optimistic near-term growth outlook makes Enphase an attractive opportunity for new investors. The appeal lies in its valuation: with a forward EV-to-EBITDA ratio of just 22.62—51.69% below its five-year average—this is a moment to “be greedy when others are fearful.”
If the company achieves $1.8 billion in revenue for Fiscal 2025—a conservative estimate—it will likely trade at a higher EV-to-sales ratio than its current 6.8. However, with a projected revenue growth rate of 20% as an annual average over the next five years, compared to its historical five-year average of 47.5%, the growth ratio is 0.42. Applying this ratio to the five-year average EV-to-sales multiple of 14.5 yields a fair long-term EV-to-sales multiple of 6.11.
Using 6.11 as my terminal multiple to be conservative, Enphase’s enterprise value could reach $11 billion by the end of Fiscal 2025, reflecting a 29.11% growth from its current $8.52 billion. In a more optimistic scenario, factoring in increased sentiment related to a likely 35% revenue growth rate for the year, a terminal multiple of 7.5 implies an enterprise value of $13.5 billion, representing a 58.45% growth over the same period.
Downside Momentum Could Persist Into 2025
Counter to my bullish outlook, Enphase has recently faced challenges in Europe, with regional revenues declining by 15% quarter-over-quarter in the latest results. While a stable recovery is likely as macroeconomic conditions improve, prolonged weakness in this market through 2025 and 2026 could hinder the company’s overall performance. Although the international market represents Enphase’s highest-growth segment, most of its revenue comes from the U.S., offering moderate overseas exposure.
Investors should also consider the risks associated with Enphase’s current valuation, particularly as its stock price has declined by over 70% in the past three years. While we are likely nearing the bottom of this decline, driven by expected growth next year, persistent negative momentum could delay a recovery in valuation. As such, patience and conviction are essential for this cyclical short-term investment.
Long-Term Solar Investing Comes With High Volatility
I’m somewhat bullish on Enphase for the long term, and the company’s international growth strategy is pivotal for long-term investors. The Asia-Pacific solar market, projected to grow at a 12.46% CAGR (2024–2034), is a key focus, with IQ8P microinverters already shipping to Thailand and the Philippines. Additionally, Enphase targets fast-growing solar markets in Latin America, including Brazil and Mexico, driven by favorable climates and rising electricity demand.
While this presents a long-term revenue growth opportunity, the solar industry will remain inherently cyclical, influenced not only by interest rates but also by policy shifts. Currently, there is growing concern that the Inflation Reduction Act could be repealed under the incoming Trump administration.
Enphase’s profitability can also be impacted by China driving down prices. Increased tariffs on Chinese imports to the U.S. could provide short-term benefits for Enphase, but such isolationist measures might trigger intense international trade competition, potentially hindering the company’s overseas growth in the long term.
Clearly, numerous factors contribute to the long-term uncertainty of investing in solar power companies. Therefore, I believe the best strategy for investing in Enphase is to capitalize on its near-term cycles. For Enphase, the impending upcycle may remain stable until 2027 or slightly beyond, at which point I plan to sell my stake.
What Does Wall Street Say About Enphase?
Wall Street analysts rate Enphase stock as a Moderate Buy, with an average ENPH price target of $90.94, suggesting a 26.46% upside potential over the next 12 months. This consensus is based on 14 Buy, 12 Hold, and four Sell ratings, reinforcing the view that now may be an opportune time to invest in the company.
Conclusion: Enphase Is Worth Buying Right Now
While this year has brought significant downside for Enphase, 2025 is likely to mark a turning point. The current valuation appears very reasonable, given the growth expected in 2025. Although heavy volatility will likely continue to define Enphase’s long-term price action, the next few years should offer a period of stability, growth, and profitability for both the company and its investors. As such, I rate Enphase stock a Buy.
