Enphase Energy (NASDAQ: ENPH) stock price has been in a strong freefall as solar energy shares plummeted. The shares crashed to a low of $118.05 on Monday, the lowest level since January 2022. They have retreated by more than 65% from the all-time high.
Interest rates and inventory headwindsEnphase Energy is a leading player in the solar energy industry with a market cap of over $16 billion. The company sells microinverters and other products like batteries, electric vehicle chargers, and grid services. It sells its products to solar distributors in countries like the US, New Zealand, Canada, and in Europe.
Enphase Energy and other clean energy stocks like Sunrun, Brookfield Renewable, and Siemens Energy have underperformed the broader market this year. Most of them have crashed by more than 50% from their highest points in 2021 as concerns about the industry remained.
One of the top reasons for the underperformance is the Federal Reserve, which has embraced an extremely hawkish tone this year. The bank has hiked rates from zero in 2022 to 5.25%, the fastest pace of increase in a long time. Higher interest rates have led to a slowdown in discretionary spending among customers.
Most importantly, Enphase Energy has huge inventories, which it is aiming to reduce in the coming months.
There are signs that Enphase Energy’s business is slowing. The most recent results revealed that its total revenue came in at $711 million, missing analysts’ estimates by $14.87 million. The company also slashed its forward guidance, citing the elevated inventory levels. Answering a question about inventory, the company’s CEO said:
“To do a onetime correction of that to reduce inventory in the channel. The only way we reduce inventory in the channel is by not shipping as much and taking a correction there.”
Looking forward, the company has numerous challenges ahead as its historically strong growth slows. This trend could hit its profits and valuation, which is still high despite the stock price plunge.
Enphase Energy stock price forecast
The weekly chart shows that the ENPH share price has been in a strong downward trend after peaking at $338 in August. It has recently dropped below the 200-week and 50-week moving averages. The two averages are about to form a bearish crossover pattern known as a death cross.
Enphase share price is also approaching the key support at $109.70, the lowest level on May 10th 2021, and January 24th January 2022. The Relative Strength Index (RSI) is also approaching the oversold level.
Therefore, the shares will likely have a bearish breakout in the coming weeks. This view will be confirmed if the stock moves below the key support at $109.70. If this happens, the next key level to watch will be at $100.
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