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3 ‘Strong Buy’ Stocks That Are Set to Beat Earnings This Week
February 09 at 3:49 pm
We’re well into earnings season, and so far, investors should be gratified by the results. Cumulatively, some 56% of the S&P 500 companies have reported so far; of those, 79% have beaten earnings estimates. Overall, earnings are up 45% in the past 12 months, and this is the fourth quarter in a row with sequential gains of 25% or more.
While the earnings season has been solid, there is one cautionary note – the immediate comparison is to 2020, when the COVID pandemic had a negative impact on a wide swath of sectors and pushed down earnings. Still, the rebound is significant, and indicates underlying economic strength.
With this in mind, we used TipRanks’ Earnings Calendar to get the lowdown on 3 Strong Buy tickers reporting quarterly results later this week. Let’s dive in and see what makes these stocks stand out.
We’ll start our look with Enphase Energy, which reports its 4Q21 earnings on February 8 after the markets close. Enphase is a designer and manufacturer of solar inverters, an essential hardware technology in solar power industry. Photovoltaic solar panels produce direct current (DC) electricity, which inverters convert to the alternating current (AC) power that is transported by the electric grip and used in our applications. Enphase was the first company to offer commercial-scale inverters on the market, and remains a leader in the solar power industry.
Heading into the Q4 results, a look back at Q3 can provide some insight. Enphase reported $351.5 million at the top line, a company record, and 60 cents per share earnings, the highest in over two years.
Looking ahead to the Q4 results, Enphase has high hopes. During the fourth quarter, Enphase launched its latest product, the IQ8 microinverter. This is billed as the most advanced such device on the market today, and is considered a ‘smart’ device, able to form its own microgrid to supply power during an outage – directly from solar energy. The IQ8 does not require a battery system during daylight. The higher price of the IQ8 device, compared to its predecessors, should offset increases in materials and manufacturing costs.
Nothing exists in a vacuum, and Enphase faces regulatory and policy issues that are unique to the solar industry. The Biden Administration’s failed Build Back Better bill included a strong push to solar power, that would have been a boon for Enphase; the company now must be patient and see if any of those provisions are enacted independently by Congress. And, in California, the state government attempted to push a power utility regulation that would have seriously constrained the residential solar market. Popular pushback is forcing the state authorities to reconsider.
The likelihood of an improved regulatory environment has Guggenheim analyst Joseph Osha somewhat bullish. He writes of Enphase’s near-term prospects, “We think that valuations and investor expectations have become more reasonable. At the time we cut our ratings in October, the majority of our estimates for 2022 were below consensus. That is no longer the case, and we believe that investors can start 2022 with some confidence that they aren’t looking at downward revisions… It is important to remember that even in a scenario where California policy takes a sharp turn for the worse, the market transition mechanism could actually drive better demand for the near term…”
Osha, a 5-star analyst, puts a Buy rating on Enphase, along with a $213 price target that suggests an upside of ~49% in the year ahead. (To watch Osha’s track record, click here)
The Street’s outlook on Enphase remains bullish, with the 18 recent reviews including 16 Buys and 2 Holds, for a Strong Buy consensus rating. The shares are selling for $142.04 and the $234.94 average price target implies a one-year upside potential of ~65%. (See ENPH stock forecast on TipRanks)