This Solar Stock Just Got Even Brighter

Monday brought a modest pullback in the stock market, as investors took a pause after a couple of strong days for stocks. A late-day drop sent the Nasdaq Composite (^IXIC) down more than 1%, while the Dow Jones Industrial Average (^DJI -0.63%) and S&P 500 (^GSPC -0.89%) also posted losses.

Data source: Yahoo! Finance.

Among Nasdaq stocks, one sign of success is when a company gets invited to join the Nasdaq-100 index. That happened to Enphase Energy (ENPH 2.03%) over the weekend, with the disruptive solar power innovator earning yet another accolade after stellar performance for its stock.

Unlike many growth stocks — including the one that’s leaving the Nasdaq-100 to make room for it — Enphase has been able to take advantage of favorable conditions in its industry to keep expanding. Below, you’ll learn more about Enphase and how its stock reacted to the news, as well as the company that’s leaving the index.

Enphase keeps charging up

Shares of Enphase Energy finished the day higher by 2%, bucking the downward trend in the market and challenging $300 per share. The stock set new all-time highs just a couple of months ago, and it’s within 8% to 9% of its record level after today’s gains.

Enphase’s business largely consists of providing microinverters for solar power systems, and business has been good. In the third-quarter financial report it released in late October, the company reported year-over-year sales growth of more than 80%, and earnings more than quintupled from year-earlier levels. Shipments of microinverters totaled almost 4.35 million, helping to power systems generating more than 1,700 megawatts of electricity.

Yet Enphase is also looking forward with new achievements. Its IQ battery storage platform is gaining adoption rapidly, particularly in areas that are more sensitive to the potential for power outages or other disruptions. All in all, Enphase has set high expectations to keep on track as demand remains robust. Even with the stock near all-time highs, it’s hard to fault the Nasdaq for inviting such a successful player in a key high-growth industry into its premier index.

Okta heads out

Meanwhile, for every stock going into the Nasdaq-100, one has to come out. Okta (OKTA -5.41%) got the bad news, with the switch officially taking place before the market’s open on Monday, Nov. 21.

Okta has had a tough year, losing more than 70% of its value since the beginning of 2022. As a result, its market capitalization of around $8 billion is just a fifth of the $40 billion for Enphase Energy currently. Its stock lost another 5% on Monday.

The cloud-identity specialist has been able to maintain solid growth so far, with second-quarter sales jumping 43% year over year to nearly $452 million. But Okta has had some challenges in integrating its recent acquisition of customer-identity software specialist Auth0.

Moreover, the broader macroeconomic environment has deteriorated in a manner that has resulted in longer sales cycles, and Okta has chosen to take steps to rein in some costs by slowing its hiring in the second half of 2022.

Okta’s focus on profitability is a necessary step that many software companies in the Nasdaq have had to adopt quickly over the past year. Yet unlike Enphase, which has been solidly profitable for several years now, it could take time for Okta to find its way to generate permanently positive earnings for its shareholders. Nasdaq-100 index investors might not have to worry about that, but Okta’s own investors will be watching very closely to make sure it makes the most of its opportunities to recover.