Barclays sees pressure on Enphase and SolarEdge as Tesla gains market share

Barclays reiterated an Equal Weight rating on Enphase Energy (NASDAQ:) and cut their 12-month price target on the stock to $221.00 (From $226.00), while reiterating an overweight rating on SolarEdge Technologies (NASDAQ:) with a price target of $359.00 (from $390.00) after California data shows Tesla (NASDAQ:) taking a larger market share in the solar energy market.

According to recent California datapoints researched by Barclays, Tesla’s solar and storage market share has seen a notable uptick in April and May, aligning with the timing of NEM 3.0 applications.

Analysts wrote in a note, “It started in April and the momentum has accelerated into May. It appears that SEDG initially gained market share in January and February but then lost market share as ENPH ramped up in March and April, even in the Tier 1 and 2 markets, while TSLA’s share also started to climb.“

“In May, TSLA’s market share materially increased, mostly at the expense of ENPH,” added analysts. “While the dataset for May is not complete and it is somewhat premature to draw definitive conclusions, we think the directional trend of TSLA is a bit alarming.”

After being range-bound between 7 and 10% for the last 2 years, Barclays does not think it is a coincidence that the timing of Tesla’s market share gain aligns with NEM 3.0 applications.

When the economics favor solar-only, Tesla offering a cheaper inverter likely isn’t going to move the needle much. However, if Tesla is offering a solar + storage system that is ~50% cheaper than a common alternative, the nominal savings would be too large for a homeowner to overlook. Barclays this dynamic will put pricing pressure on ENPH and SEDG inverters and batteries in CA and believes that price cuts are inevitable in the state.

Barclays raised 3Q23 and 4Q23 estimates to be in line with consensus but cut numbers beyond 2023.

For SEDG’s 2Q, Barclays estimates will report revenue of $995 million, but estimate that non-GAAP gross margins increase sequentially to 34% (from 32.6%) vs. 32-35%. They see gross margin dipping slightly in the 3Q as battery shipments and commercial continues to grow at a faster clip than residential.

Shares of SEDG and ENPH are up 0.41% and 1.36%, respectively in pre-market trading on Tuesday.