Sometimes being bearish just stops making sense, even when the story hasn't fundamentally changed. That's essentially what KeyBanc Capital Markets told investors about Enphase Energy Inc. (ENPH), upgrading the solar microinverter company from Underweight to Sector Weight.

What Changed the Analyst's Mind

Analyst Sophie Karp made the call after watching Enphase shares absolutely crater this year—down 53% while the S&P 500 climbed 16%. At some point, bad news gets fully absorbed by the market, and Karp believes that point has arrived. The bearish thesis, she noted, is now "baked into the shares."

That doesn't mean everything is suddenly rosy. The company's long-term growth trajectory remains murky as management works through a new business strategy. But here's the thing: Enphase carries zero debt and throws off strong free cash flow, which provides a nice cushion while the company figures things out.

The Path Forward

Karp expects the painful channel de-stocking process to wrap up by early 2026, with market conditions normalizing in the second half of the year. Several tailwinds could help: declining interest rates, favorable power price trends, and improving access to financing options for solar installations.

The Numbers

Enphase Energy shares traded up 1.57% at $34.27 on Monday. The company operates in the volatile semiconductor sector with a market cap of $4.49 billion and a P/E ratio of approximately 23.1, representing a premium valuation compared to some industry peers.