The US residential market outlook for CECEP Solar Energy is under pressure. Morgan Stanley downgrades Enphase (ENPH.US) and SolarEdge (SEDG.US) ratings.

American solar inverter manufacturer Enphase Energy (ENPH.US) saw its stock price drop more than 15% on Wednesday, as the company's first quarter performance and second quarter revenue guidance both fell short of expectations. In addition, Morgan Stanley also downgraded its stock rating and target price for Enphase Energy, delivering another blow to the stock. Morgan Stanley lowered its rating on Enphase Energy from "hold" to "sell" and slashed the target price from $67 to $36. Analysts stated that the downgrade reflects deteriorating demand, tariff risks, and potential negative impacts from the Inflation Reduction Act (IRA), resulting in a 32% cut to the bank's EBITDA forecast for Enphase Energy in 2026. While analysts noted that Enphase Energy's balance sheet strength is an advantage compared to peers, the stock faces multiple compression and downside risks due to the deteriorating outlook in the residential CECEP Solar Energy market. Morgan Stanley also downgraded the rating for another solar inverter manufacturer, SolarEdge Technologies (SEDG.US), from "hold" to "sell," with a target price lowered from $18 to $10. Analysts cited their expectations for deteriorating demand in the end-market, potential negative impacts from tariffs on company profits, and potential IRA-related negatives. Analysts highlighted SolarEdge's tight liquidity position and upcoming debt maturity as significant risks in the current environment. Furthermore, Morgan Stanley downgraded the stock rating for American residential solar company Sunrun (SUN.US) from "buy" to "hold," with the target price dropping significantly from $27 to $11. Reasons cited for the downgrade included the consumer-oriented nature of its products, sensitivity to interest rate increases, and uncertainty in the policy environment, posing downside risks to the company's growth. The bank noted that the rating downgrade does not reflect concerns about liquidity or the balance sheet, but in an environment of deteriorating unit economics and slowing growth, downward pressure on cash generation targets could weigh on the stock.