[ENPH] update

At the backlink I provided the model below along with the the caution to use the conservative red model even though even the blue path would likely be a big win within 18 months.  Red is always my primary model in these predictions.  I wrote: "Red says that 1 of 5 will finish, move back up into 2 of 5 and then collapse off a cliff into 3 of 5, 4 of 5 and then finally 5 of 5 in the $2 range.   A break below the pink horizontal says that blue 5 is in progress."



That prediction must have looked whacky from a percentage standpoint because the timeframe was short.  So what happened is below.  Red 1 did in fact finish with blue 5.  The model suspected around $3.47.  Actual low of blue 5/red 1 was $3.49.  The drawn model then expected a move back to $3.88.  Actual red 2 was $3.44.  Then the model expected the chart to "collapse off a cliff".  Yep, cliff happens.  Now I'm modeling a gap fill to $2.77 followed by one more big, long-killing smack down to perhaps $1.80 or just below it.  That will not be the time to sell folks.  That will be the time when max panic has set in.

The big news is that the company eeked out a tiny profit on size-able revenue of $103mn for the Q but that revs will collapse for current Q down to $62 to $70mn.  That really does not surprise me given the low cost of oil and also the fact that nobody wants to install solar panels in the winter time.  All roof oriented work comes to a screeching halt in the cold north; it's just too dangerous.

Still, the herd wanted to panic and so it panicked.   This company is not in big debt and it didn't even lose money this Q.  People act like mgt will be unable to cut costs even though they know revs will be down.

But they do know what they are doing as seen in the earnings call transcript: "Now let's discuss our outlook for the fourth quarter of 2015. We expect revenue for the fourth quarter 2015 to be within a range of $62 million to $70 million. The fourth quarter revenue decline is driven by a correction of higher inventory levels in our distribution channel and softer overall market demand.
We expect gross margins to be within a range of 23% to 26% as a result of a more aggressive pricing strategy. We also expect non-GAAP operating expenses for the fourth quarter of 2015 to be within a range of $28 million to $30 million. As we begin to adjust our operating expenses to our lower gross margin profile."

So this company still has gross margins of 23+% even after a huge 18% price reduction.

The CEO added, "However, I'm confident that over the next 24 months we'll be able to drive down our product cost even more aggressively than ever before. As we stated on our earnings call last quarter, we firmly believe that because of our advanced design, semiconductor-based technology and proven cost reduction track record. The cost of our microinverter system will approach that of string inverters."

When microinverters cost the same as string, micro will soar.  Micro is much better from a redundancy standpoint and from a maintenance standpoint after the installer is long gone and never heard from again.  This business has no support!!  It's like construction except worse.  The installers exist and are gone from week to week.  So maintaining and monitoring these is a DIY deal and that gives a big advantage to microinverters.  ENPH just has to get their new cost structure inline with the fact that their biz is now a commodity, just like solar panels.  So I do not think this is a race to BK.  I think it is just people selling causing more selling that feeds on itself.  Stocks are prone to this because of their natural inherent value of zero.  ENPH will be cyclic just like commodities.  Buy low when the EW model indicates a good chance of bottoming, sell high...