Brutal Year Gets Worse As Tax Credits Face Axe

Enphase Energy (NASDAQ: ENPH) shares tumbled 16% in extended trading on Monday, June 16, following the unveiling of proposed changes to President Trump’s tax legislation by Senate Finance Committee Republicans. The proposed modifications would eliminate solar, wind, and energy tax credits by 2028, dealing another blow to the already struggling solar energy company. Enphase isn’t the only company experiencing a downturn. SunRun stock has dropped 27% in extended trading, and First Solar is down 11%.

The timing of this policy shift couldn’t be worse for Enphase, as the company faces mounting challenges in its core U.S. residential solar market. High interest rates have dampened consumer appetite for solar installations, while regulatory changes in California—the nation’s largest solar market—have significantly reduced net metering benefits. These reforms cut the credits homeowners receive for surplus electricity fed back into the grid, undermining the economic appeal of residential solar systems. That said, for investors looking for potential gains with less volatility, the High Quality portfolio has comfortably outperformed the S&P 500, delivering over 91% returns since inception. Separately, see – Should You Buy CRWV Stock After A Whopping 4x Rise?

Financial Performance Reveals Underlying Weakness

The latest stock decline extends Enphase’s brutal performance trajectory, with shares down 62% over the past twelve months. This collapse reflects fundamental operational challenges that extend beyond policy uncertainty.

Enphase has delivered average revenue growth of 6.5%, which marginally outpaces the S&P 500’s 5.5%. However, this modest outperformance remains tepid for a technology company operating in what was previously considered a high-growth sector.

The company’s operating margin of 10.7% trails the broader S&P 500’s 13.2%, underperforming market profitability metrics by 250 basis points. This profitability gap highlights operational inefficiencies that have persisted despite the company’s market position in solar energy solutions.

Furthermore, the stock has shown poor resilience during market corrections, as shown in our Buy or Sell Enphase Energy stock dashboard. This suggests weak investor confidence and limited defensive characteristics typically associated with utility-adjacent sectors.

Valuation Disconnect

Despite these operational challenges, Enphase trades at a premium valuation of 3.8 times trailing twelve months revenue, compared to 3.0 times for the benchmark S&P 500 index.

This valuation premium appears disconnected from the company’s underperforming fundamentals, suggesting potential for further downside pressure as investors reassess the stock’s risk-reward profile.

The convergence of policy headwinds, market saturation concerns, and operational underperformance creates a challenging environment for Enphase Energy. The proposed elimination of renewable energy tax credits by 2028 adds long-term uncertainty to an already weakening demand environment, while the company’s premium valuation offers little downside protection. Now, we apply a risk assessment framework while constructing Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.