Solar Storm Intensifies
The part of the story everybody is missing
Since I first wrote Solar Storms back in August, as a Red Flags Alert, SolarEdge has been crushed – plunging 50%.
Enphase also took a hit, but then rebounded… and until today was above where I first flagged it. It’s now down 6%, with much of that decline happening today.
I have no idea what has hit the stock, but whatever the reason, here’s what you need to know…
Enphase ($ENPH) and SolarEdge ($SEDG)make inverters, boxes attached to the solar panels which convert electricity from DC to AC so it can be used to power your home. They’re viewed as having a duopoly in residential solar.
One reason SolarEdge got hit so hard and stayed down was that it has considerably more exposure to Europe, where there was an enormous glut of inventory and a surge of competition from China.
By contrast, 65% of Enphase’s business is in the U.S., which has its own solar-related issues. But even after offering harsh guidance, Enphase has captured the imagination of investors… in part because of how well it has done in the past.
What They’re Missing
But there’s a twist in the story, which those same investors seem to be missing. And it’s the reason my pal Russell Young of Decameron Capital, his family office, is short Enphase. And it’s why, despite its plunge, he is still short SolarEdge. (Note: As a result of a collaboration that I’ll be rolling out soon, I’ll be sharing some of Russell’s ideas going forward... plus those of a few others. Stay tuned!)
In Russell’s view, investors in both companies are missing the potential impact of one thing…