What Happened?
Shares of home energy technology company Enphase (NASDAQ:ENPH) fell 4.3% in the afternoon session after S&P Global announced the company will be dropped from the S&P 500 index. The change, part of a quarterly rebalancing, will take effect before the opening bell on September 22. Such a removal often triggers selling pressure from index funds that track the S&P 500, as they are required to sell their holdings to align with the index's new composition. According to S&P Dow Jones Indices, Enphase has shrunk in size and will be demoted to the S&P SmallCap 600 index.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Enphase? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Enphase’s shares are extremely volatile and have had 46 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock dropped 1.4% on the news that the major indices continued to retreat (Nasdaq -1.5%, S&P 500 -1.2%) amid profit-taking and renewed concerns about tariffs. Investors reacted to a federal court ruling that most of President Trump's global tariffs were illegal, raising uncertainty over trade policy and the fiscal impact of potential refunds. Rising Treasury yields added to the pressure, with the 10-year climbing above 4.2% and the 30-year nearing 5%, intensifying worries about stretched equity valuations. September's historically weak track record for stocks further dampened sentiment, leaving traders cautious ahead of the jobs report later in the week and the Federal Reserve's upcoming rate decision.
Enphase is down 46.4% since the beginning of the year, and at $38.28 per share, it is trading 68% below its 52-week high of $119.74 from September 2024. Investors who bought $1,000 worth of Enphase’s shares 5 years ago would now be looking at an investment worth $588.48.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.