Enphase Vs. SolarEdge: Which Solar Stock Is A Better Buy?

Enphase Energy (ENPH) and SolarEdge (SEDG) are both solar companies well poised to benefit from the worldwide transition towards clean energy solutions in the upcoming decade. However, one stock is trading at a significantly lower valuation, providing it with solid upside potential in the next 12 months.

There is no denying that the shift to clean energy solutions will accelerate in the upcoming decade, as the world is transitioning towards renewable energy sources and reducing the carbon footprint. In fact, solar power is already cheaper than coal, gas, and nuclear energy. Further, generating solar power is likely to be the lowest-cost energy solution by 2030.

Several utility companies are shifting towards renewable energy solutions and are seeking out proposals to build infrastructure and invest heavily in this sector to benefit from economies of scale. A report from Fortune Business Insights has forecast the global solar power market size to rise from $163.7 billion in 2019 to $195 billion in 2027, indicating an annual growth rate of 5.9%.

Keeping these factors in mind, today I’m going to analyze two solar stocks, Enphase Energy and SolarEdge, to determine which is the better investment right now.

Enphase Energy has crushed the broader markets since IPO

Enphase Energy (ENPH) went public in March 2012 and has since returned a staggering 2,430% in just over nine years. Despite its stellar performance, Enphase stock is down 13% from record highs, providing investors an opportunity to buy the dip.

Enphase develops, manufactures and sells home energy solutions for the solar photovoltaic industry in the U.S. and other international markets. It offers a semiconductor-based microinverter that converts energy at an individual solar modular level while combining the company’s proprietary networking and software tech to provide energy monitoring and control solutions.

In Q1 of 2021, Enphase Energy saw its sales increase by 47% year over year to $301.8 million and ended the quarter with a healthy gross margin of 40.7%. In the second quarter, the company estimated sales between $300 million and $320 million which means top-line might grow 58% at the midpoint guidance.

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