Why Enphase Stock Is Soaring Today

Congress apparently is having second thoughts about ending tax credits for rooftop solar. That talk is giving solar stocks a charge, with Enphase Energy (NASDAQ: ENPH) up 10% as of 10 a.m. ET.

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Solar gets its day in the sun?

Enphase makes microinverters and other components necessary to turn the sun's rays into energy for your house. The stock has lost about half of its value in the last six months on investor concerns that the new political climate in Washington is less favorable toward solar, which could stunt demand for Enphase's products.

But the situation might not be as dire as some had feared. Late Wednesday, U.S. Senator Kevin Cramer told reporters that Republicans are discussing changes to a provision that would end tax credits for rooftop solar panels.

The senator said the Senate's version of the massive budget bill currently being debated in Congress could offer clean energy credits that are "a little more generous" than the version that came out of the House of Representatives.

Is Enphase a buy?

Investors should be aware that the legislation is still very much a work in progress, and buying in based on headlines about negotiations can be dangerous. We won't know the fate of the credits until a budget bill is signed into law, and that could be months away. It's possible the two sides end up with a compromise, but that could include a drastic reduction in credits even if they are preserved.

That said, Enphase is a market leader in solar with a strong balance sheet and cost advantages over its rivals. As solar gains popularity worldwide, there should be ample opportunities for Enphase to benefit. Investors with patience and a stomach for volatility could do well in the long run by buying in today.

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Lou Whiteman has positions in Enphase Energy. The Motley Fool recommends Enphase Energy. The Motley Fool has a disclosure policy.