I've been doing a bit of digging into the numbers of Enphase to understand at what point I want to load up on Enphase shares. But during my research I have bumped into something that doesn't completely make sense to me. Maybe I'm thinking in a wrong manner, and that is what I would like to find out by making this post. In short, what is Enphase to understand my thought process: Enphase is in the microinverter business. This is a chip that's attached to one or multiple solar panels. This chip increases output, efficiency and collects data regarding the solar panel. Microinverters are bought by residentials who have installed solar panels on their roof. So more solar roof instalments, more microinverter sales for Enphase.
Solar instalments are reliant on many factors, but here are the biggest ones I have noted:
- Module cost (The solar panel cells)
Solar modules (20-25% of total installation costs) has decreased in price between 45% and 50% from Q1 2023 to Q 2024. This is bullish for Enphase as you'd expect more installations, and thus more microinverter sales.
- Total installation labour costs (installers)
This one was a bit harder to do research on. Although I have found on solar.com that the average cost per watt of an installation was $2,71 in 2022. While https://www.forbes.com/home-improvement/solar/cost-of-solar-panels/ says that currently it costs around $2,11 per watt, even decreasing to $1,5 when an installation is done with monocrystalline solar panels.
- Energy costs
These have gone up according to: https://www.bls.gov/regions/midwest/data/averageenergyprices\_selectedareas\_table.htm by more less 3% from start of 2023 to start of 2024. Not very impactful but none the less increases the return on solar systems.
- NEM 3.0
NEM 3.0 is the new policy that was effective from the 15th of April 2023 onward. Energy sent back to the grid by overproduction by solar panels would previously be compensated for moments a house hold does not produce enough for their own energy consumption. With NEM 3, only one fourth of what is over supplied and sent to the network can be compensated in the future. Making the return on a solar panel system a lot less.
- Interest rates (as usually solar projects are financed)
Now for the interest rates. The thing I thought would have the most effect on the sale of microinverters, but as I have done research I am doubting this is the case. See the revenue and the concerning fed rates below.
Q2 2022: 530 mil, while the federal fund rate was: 0,5%-1,75%
Q3 2022: 634 mil, while the federal fund rate was: 1,75%-3,25%
Q4 2022: 724 mil, while the federal fund rate was: 3,25%-4,5%
Q1 2023: 726 mil, while the federal fund rate was: 4,5%-5%
Q2 2023: 711 mil, while the federal fund rate was: 5%-5,5%
Q3 2023: 551 mil, while the federal fund rate was: 5,5%-5,5%
Q4 2023: 302 mil, while the federal fund rate was: 5,5%-5,5%
Although the feds fund rate was 4,5%-5% in Q1 2023 the revenue for Enphase was 726 million. For Q2 the rates were similar and the revenue was slightly worse at 711 mil. Now in Q3 the feds fund rate hardly changes. But the revenue craters. Q4 once again the revenue craters even though the federals fund rate is similar to Q1 and Q2 2023, when revenue was more than double the revenue in Q4 2023.
Does the federals fund rate have a delay when it comes to the financing of something like a solar project or is this big drop in revenue maybe more likely linked to NEM 3 more than the feds rate.
