Enphase Energy, Inc. (NASDAQ: ENPH) stock is down 16% in after-hours trading after concerns about softening revenue in the next quarter. On a day when investors were reminded that the banking crisis is still festering in the background, any bad news was going to be punished. However, as difficult as this may feel for investors who bought around the March low, this looks like an opportunity for patient investors with a long time horizon.   

Of course, one of the difficult things for any investor to do is to be patient. The pullback has sent ENPH stock near its $183.64 closing price on March 17, 2023. At that time, the stock was down approximately 45% from its 52-week high set in December. Investors who “bought the dip” in the stock may be wishing they took some profit off the table. 

A Split Decision  

The company’s first quarter earnings report was mostly positive. The company reported earnings per share of $1.37. That handily beat analysts’ expectations of $1.20 EPS.  

On the top line, it was more of a mixed bag. Sales of $762 million was 1% below analysts’ expectations of $732.30 million. However, it was 64% higher than the $441 million the company recorded in the same quarter in 2022. Enphase also reported an increase in its gross margin. The miss in revenue occurred because a 9% year-over-year miss in the United States (the company’s largest market) was not enough to offset strong growth in Europe. 

Also, the company is now forecasting second quarter revenue to be in a range of $700 million to $750 million. Analysts were expecting $772.96 million. Enphase attributes the softer revenue in the upcoming quarter to U.S. distributors needing to work through a backlog of inventory. 

Any decline in sales in the company's largest market should be taken seriously. But the company said that its European business is showing strong growth. And the company is also seeing growth in other international markets. 

What Could Go Wrong?  

The company's forecast for the United States is based on expectations that the backlog in inventory will work itself through in the next quarter or two. But suppose the long-awaited recession arrives sometime later this year as expected. In that case, consumers will be hesitant to invest in solar regardless of any rebates being offered by the Biden administration. 

There are also concerns that Enphase could suffer a production slip-up as it relies on a contract manufacturing facility in China. This is at a time when relations between the United States and China are increasingly strained.  

Accumulate the Dip? 

According to MarketBeat’s Enphase Energy analyst ratings, B. Riley increased its price target for ENPH stock to $247 from $242 immediately after the earnings report.

That’s not a screaming endorsement but investors may get a better clue by looking at the Enphase Energy institutional ownership. Currently, approximately 73% of institutions own the stock. And there was more buying than selling in the first quarter.  

However, as the wicked price action shows, many investors have little patience for growth stocks. And that means there is a possibility for ENPH stock to fall further. But if you have patience and believe that the company is one of the best solar plays in the market, then now is a good time to start accumulating shares. There’s no need to go all in. But these are times to nibble on the stock as it gives investors another opportunity to get shares well below the target price of analysts.