Enphase: Can Microinverters Become Mainstream?

Enphase Energy is in many ways the envy of all solar companies. It has approximately 60% market share in US residential solar inverters, best-in-class profitability, and a capital-light business model. Much of Enphase’s success is attributable to its microinverters, which we view as more differentiated than peer solar inverter offerings. But a key drawback of microinverters is their limited addressable market. Microinverters are a premium product best suited for small (rooftop) solar systems. Hence, Enphase has historically focused on the residential market and in limited geographies—the US, Netherlands, and France. We view the key driver of the shares over the coming years to be Enphase's success in penetrating new end markets (commercial) and new geographies while maintaining its superior margin profile.