Why Enphase Energy Inc’s Shares Popped 38% Today

What happened

Shares of microinverter Enphase Energy Inc (NASDAQ: ENPH) jumped as much as 38.4% in trading Wednesday after the company announced an important acquisition of SunPower‘s (NASDAQ: SPWR) microinverter business. Shares held steady with their gains throughout the day and were up 34% at 11:50 a.m. EDT.

So what

Enphase is acquiring SunPower’s microinverter business for $25 million in cash and 7.5 million shares of stock. The deal announcement says Enphase will exclusively co-develop microinverters for SunPower’s residential solar panels, expecting to add $60 million to $70 million in annualized revenue in the second half of 2019 at a gross margin of 33% to 35%. However, it looks like Enphase will shut down SunPower’s microinverter business after buying it, moving to its own IQ line of products instead.

Image source: SunPower.

The acquisition could add 20% to Enphase’s revenue and bring the company close to breakeven financially. That would be an incredible turnaround from a year ago, when it looked like Enphase might not be financially viable much longer.

Now what

Enphase is spending a lot of money to add big customers, but adding SunPower’s high-efficiency solar panels to the product portfolio is a nice win for the company and gives some product validation for other buyers as well. The deal also looks like it’s a win for SunPower, which is getting $25 million in cash and about $45 million in stock at today’s valuation. Sometimes deals are a win-win for companies, and that looks like the case for these two solar manufacturers today.

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Travis Hoium owns shares of SunPower. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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