By Elsa Ohlen

Enphase stock plunged Wednesday after the solar technology company missed on both top and bottom lines in its latest earnings report and said tariffs would hit margins in the current quarter.

Shares plunged more than 11% to $47.16 in premarket trading early Wednesday.

First-quarter adjusted earnings came in at 68 cents a share on revenue of $356 million, missing expectations of 73 cents a share on revenue of $362 million, according to analysts polled by FactSet.

Like many other solar companies, Enphase stock has taken a hit in the past few years amid high interest rates, elevated inventories and weak demand for residential solar. Enphase shares were down 50% over the last 12 months by Tuesday's close. The Invesco Solar ETF is down about 28% over the same period.

Interest rates and policy uncertainty continue to weigh on demand, TD Cowen analyst Jeff Osborne said following Enphase's earnings report, noting that tariffs are taking a bite out of the company's margin outlook.

It sees tariffs reducing its gross margin by two percentage points in the second quarter and between six and eight percentage points in the third quarter, much due to its battery cells being sourced from China, CEO Badri Kothandaraman said during the company's earnings call.

"We expect the gross margin impact to gradually lessen over the subsequent quarters as our mitigation efforts take effect. We are moving with urgency," Kothandaraman added. "We have already identified tangible sourcing options outside China and we are fast tracking the qualification."

It isn't yet clear exactly how tariffs will impact Enphase and other solar companies.

While Trump's rhetoric of favoring carbon-based energy sources over renewables hasn't done much to improve sentiment around solar, the sector got some much-needed good news Monday. The Commerce Department and the U.S. International Trade Commission will impose duties on Southeast Asian solar companies found to be subsidized by China. These companies have dumped the price of solar products in the U.S., the department said. This is separate from the sweeping reciprocal tariffs announced by Trump on April 2.

Tariffs will vary depending on country and company, but they appear to be high enough to make U.S. manufactured solar-equipment cost-competitive, Barron's reported Tuesday. On the flip side, it will increase costs for American companies that are importing foreign-made modules.

Solar firms, especially those with manufacturing primarily based in the U.S. -- like First Solar -- rose on the news.

Yet, the broader clean energy sector is worried. Trump last week issued a stop order on an offshore wind project in New York that had already begun construction. Tax benefits from the Inflation Reduction Act (IRA), implemented by the Biden administration, is also under threat as a Republican Congress may cut tax credits for renewables like solar.

Enphase said Tuesday it expects its net IRA benefit to be between $30 million and $33 million for the current quarter, or about 9% of projected revenue for the period.

Write to Elsa Ohlen at elsa.ohlen@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 23, 2025 06:56 ET (10:56 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.