Solar Stock Faces Off With Key Trendline

ENPH is trying to reclaim its year-to-date breakeven level

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Solar stock Enphase Energy, Inc. (NASDAQ:ENPH) is up 57% year-over-year, but has struggled to gain traction in 2021. With earnings still a few weeks away, how should options traders proceed as the fourth quarter gets underway?

Last seen trading at $174.47, Enphase stock is a far cry from its Feb. 10 record high of $229.04. However, the shares' 320-day moving average has emerged as support this year, containing skids in May and early October. 

ENPH Stock Chart

From a fundamentals perspective, Enphase Energy stock has an extremely high valuation, with ENPH's price-earning ratio coming in at a 136.73. However, the energy tech company’s fundamentals suggest that Enphase Energy stock is shaping up to be a strong growth investment. ENPH also has a forward price-earnings ratio of 60.24, which is still a very high figure but suggests a massive upcoming increase in earnings.

Enphase Energy has also grown its revenues 271% and has increased its net income by $228 million since fiscal 2017, taking ENPH to $1.06 billion in revenues and $183.4 million in net income over the past 12 months. In addition, Enphase Energy has a decent balance sheet with $1.31 billion in cash and $1.03 billion in total debt. Overall, ENPH remains a solid pick for growth investors, despite Enphase Energy stock’s bearish form so far this year.

The good news for prospective options traders is that premium is reasonably priced right now. ENPH's Schaeffer's Volatility Index (SVI) of 63% sits higher than 23% of readings from the past 12 months, suggesting options players are pricing in low volatility expectations for the stock at the moment. Plus, the stock's Schaeffer's Volatility Scorecard (SVS) comes in at 90 (out at 100.) In other words, the security has exceeded options traders' volatility expectations in the last year.


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