Shoals Technologies is the IBD Stock Of The Day as the provider of solar equipment is riding a big wave of investor enthusiasm in this hot sector, like many of its peers. SHLS stock is near a buy point.
But Shoals stock on Thursday did not start out well. Goldman Sachs analyst Brian Lee downgraded Shoals to a sell from buy with a price target on SHLS stock of 21, down from 23.
He said the company's backlog growth has stagnated since the end of 2021, adding a downside risk to analyst expectations for revenue heading into 2023.
However, Morgan Stanley analyst Stephen Byrd raised the firm's price target on Shoals a few weeks earlier to 33 from 21 and kept a rating of equal weight on the shares.
SHLS stock dipped by a fraction to close at 27.60 on the stock market today. SHLS stock has carved out a deep cup with handle with a buy point of 27.80. It's also sitting above its 21-day exponential moving average. In addition, Shoals is on the IBD 50 list of top stocks.
Unlocking Billions For Clean-Energy Growth
Byrd also raised his price targets on many green energy stocks due to the massive energy bill, called the Inflation Reduction Act, recently signed into law by President Joe Biden. The bill will unlock $370 billion for clean-energy incentives and consumer benefits. It's a big reason investors have been piling into solar stocks.
It's the largest federal government spending increase on alternative energy in U.S. history. Further, its impact could last over the next decade.
Based in suburban Nashville, Tenn., Shoals provides an array of gear needed to operate large-scale solar energy projects.
The company's line of products includes cable assemblies, wireless monitoring systems, junction boxes, transition enclosures and splice boxes. The industry calls them "EBOS" solutions, which stands for electrical balance of system.
A More Standardized Process
Shoals took a solar product category that has traditionally been very fragmented and requires a labor-intensive process and turned it into one that is much more standardized and easy to install with its proprietary solar EBOS solutions.
The major components of a ground-mounted solar energy project are solar panels, inverters, the mounting system and EBOS systems. EBOS encompasses all of the components that are necessary to carry the electric current produced by solar panels to an inverter and ultimately to the power grid.
The company's flagship product is Big Lead Assembly, or BLA. It combines multiple components into a prefabricated solution that lowers installation costs. It also reduces the number of failure points.
Shoals Technologies reported second-quarter results on Aug. 15.
Revenue grew 23% from the year-ago quarter to $73.5 million, vs. estimates of $73.7 million. Shoals reported adjusted income of seven cents a share. That was in line with analyst estimates and compared with nine cents in the year-ago period.
Robust Growth Across Business Lines
"We continue to see robust growth across our business, with backlog and awarded orders up 63% year-over-year and 8% sequentially," Chief Executive Jason Whitaker said in written comments with the Shoals earnings release.
He went on to say: "Shoals navigated the significant challenges and uncertainty the industry faced during the second quarter to deliver record revenue and gross profit, while maintaining gross margin within our targeted range."
For the year, Shoals estimates revenue in the range of $300 million to $325 million. Analysts expect $312.6 million.
It has manufacturing facilities in Tennessee, as well as Portland, Ore., and Muscle Shoals, Ala.
Shoals IPO Raised $1.9 Billion
Shoals held its initial public offering in January 2021, which raised $1.9 billion. SHLS stock jumped 24% on its first day of trading.
IBD's Energy-Solar industry group rates No. 1 out of 197 tracked. IBD industry groups are a combination of companies in the same business.
Daqo New Energy leads the group, followed by Enphase, JinkoSolar, Canadian Solar and then Array Technologies.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
