ENPH US Enphase Energy, Inc.

Initiation: October 25, 2019

J Capital Research ("J Cap") is a stock-research company. J Cap has analyzed the U.S.-listed company Enphase Energy, Inc. (“ENPH”) and is hereby publishing the outcome and the conclusions of our analysis, based on publicly available information. We may benefit from a short position in the shares of ENPH, and, for this reason, there might be a conflict of interest.

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• Stuffed: We think that Enphase is pulling forward sales and stuffing distribution channels in order to make sales appear better than they are. We have analyzed industry reports and estimate that an amazing seven months of inventory is sitting in distribution channels, versus industry norms of about four to six weeks. We believe Enphase is losing market share in solar inverters.
• Margin boosting: Inventory build started with the installation of Enphase’s new COO in Q2 2017, who was elevated to CEO in September of that year. Kothandaraman’s arrival coincided with the dizzying ascent of gross margins from 18% to 34% over nine quarters in which ENPH consistently shipped more product than appears to have been installed. Enphase’s disclosures since late 2017 appear to have moved farther and farther from reality. The company has stopped disclosing key metrics and started to stonewall analysts, all the while awarding more shares to top management.
• Being run for the money: A last-minute bailout by a VC in 2016 ushered in a new set of managers who, in our opinion, focused on cutting pennies from cost and handsomely rewarding executives without regard to company culture or morale. Meanwhile, former employees tell us that Ahmad Chatila, ex-CEO of SunEdison, who precipitated the biggest bankruptcy of 2016, is acting as shadow CEO. 
• SunPower: Buying a Channel Enphase acquired SunPower’s microinverter business. What they got was a sales agreement that has not helped market share. Management of the two companies are close, and SunPower is a major holder of the stock. 
• Asymptotic Growth for Management to Hit Targets: Q1 and Q2 2019 is where revenue growth, margin and implied market share have unbelievably shot up, leading the share price to double. Management have sold down shares and hit massive bonus targets. 

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