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Enphase Energy (ENPH) Initiated As 'Buy' By Deutsche Bank, $10 PT

 April 30, 2012 01:45 PM


(By Balaseshan) Deutsche Bank analyst Vishal Shah initiated coverage of micro-inverter manufacturer Enphase Energy Inc. (NASDAQ:ENPH) with a "Buy" rating and $10 price target.

Enphase is poised to benefit from the rapid growth of micro-inverters in the grid parity era as the technology becomes mainstream due to superior advantages over traditional inverters and faster growth of residential/small commercial solar markets (currently the sweet spot of micro inverters).

The company has a defensible technology position and has a robust cost reduction roadmap. Shah expects execution on share gains and cost reduction to act as next potential catalysts for shares.

Micro-inverters offer several advantages over traditional central inverters - ease of installation, increased system optimization, higher warranty, lower system downtime during maintenance and overall increased reliability. The benefits of Enphase microinverters are evident in the company's market share gains (about 30%) in less than 2 years.

Enphase is well positioned to benefit from increased competition in both upstream and downstream segments of the solar supply chain.

Not only that, the company is actually enabling installers with no electrical experience/handling of high voltage DC lines to enter the downstream market thereby increasing competition and driving additional pressure in the overall system price (more important parameter for grid parity considering BoS costs are currently 3-4 times module costs in several markets worldwide due to less competition in the downstream supply chain).

Shah said Enphase is also a pure play downstream solar name with direct exposure to markets where units are actually growing and without additional accounting/balance sheet issues that come along with most other downstream solar names.

The brokerage established its 2012 loss per share estimate for Enphase Energy of $1.17 and its 2013 estimate of $0.51.

ENPH is trading up 7.76% at $7.27 on Monday.

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