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Companies that install solar panels for homes are upbeat about demand, so Janney Montgomergy is more optimistic about the outlook for
Enphase Energy
,
a maker of batteries used in solar systems, among other gear.
Janney Montgomery Scott analyst Sean Milligan upgraded shares of
Enphase
(ticker: ENPH) to Buy from Neutral, saying he estimates the stock’s fair value is $282. The shares closed Friday at $198.96.
Even though demand for solar panels has come into question, “recent commentary from publicly-traded residential installers has been bullish,” Milligan wrote.
Solar-related stocks got a boost from the August passage of the Inflation Reduction Act, which offers substantial tax credits to encourage use of clean-energy products such as electric vehicles and home solar panels. But the current economic environment, with rising interest rates and concern about a potential recession, has dimmed hope for a surge in demand.
A new rule in California, which accounts for a lot of solar-panel purchases, is another problem. In December, the California Public Utilities Commission passed a plan that limits how much people with solar panels on their homes will receive in repayments for returning their surplus energy to the grid.
“We expect our U.S. business to be slightly down in Q1 compared to Q4, primarily driven by seasonality and the macroeconomic environment,” Enphase Chief Executive Badri Kothandaraman said on the company’s recent earnings call. “We are seeing that our distributor and installer partners are a little more cautious in booking orders.”
Still, Enphase’s forecast of sales for the current quarter was higher than Wall Street expected. Milligan wrote in his research note that other solar companies have made comments about demand that have given him reason for optimism.
This includes
Sunnova Energy International
(NOVA), which he rates as a Buy. Management said on a recent earnings call that “demand for our energy services has never been stronger.”
SunPower
(SPWR), which Milligan rates as Neutral, recently said, “we’re very pleased with what demand has looked like really across the country.”
Solar stocks were rising Monday. Enphase shares surged 5.5% to $209.91, Sunnova jumped 3%,
Sunrun
(RUN) climbed 5.1%,
SunPower
rose 1.6% and
First Solar
(FSLR) was up 1.7%.
Write to Angela Palumbo at angela.palumbo@dowjones.com