Solar stock Shoals Technologies cleared a resistance level and broke above a trendline in bullish action Monday. Now, Shoals is the IBD 50 Stocks To Watch pick.
Shoals Technologies designs and manufactures electrical components used in solar installation and energy storage.
Its business units consist of electrical balance of systems (EBOS), battery energy storage solutions (BESS) and EV charging balance of system solutions.
EBOS carries the electricity produced by solar panels to an inverter and ultimately to the power grid.
Shoals announced Wednesday it hired Brandon Moss to be its new CEO.
Moss was the president of wire and cable manufacturer Southwire, where he oversaw the tools, components and assembled solutions group. Moss worked at Southwire for more than 15 years.
He takes over for President Jeffery Tolnar, who acted as interim CEO since February. Tolnar took the helm after CEO Jason Whitaker stepped down for health reasons. Tolnar will stay on as president.
The company announced on Monday it signed an agreement with Blattner Co. to deliver 10 gigawatts of its Big Lead Assembly (BLA) and systems solutions over the next two years to the renewable energy service provider.
Shoals holds the top spot out of 25 stocks in the solar energy industry group. The group is ranked a dismal 157th out of 197 IBD industry groups.
Solar Stock Pops On Deal News
The solar stock jumped 7.5% in heavier-than-average daily volume on Monday following the Blattner deal announcement.
The stock is in the buy zone of a trendline breakout with a buy point around 25. The trendline starts with November's high of 32.43. Shares also climbed above resistance around the 25 price level.
Trendline breakouts may represent the end of a downtrend and often occur while a stock is far off its highs. SHLS stock is about 20% off its 52-week high.
Shares had been wavering around the 200-day moving average since May 9, when they popped 22.3% in heavy volume following better-than-expected first-quarter earnings.
The solar stock had its initial public offering on Jan. 27, 2021, at 25 a share. It closed at 30.98 its first day of trading, so it's been a slog for the stock.
Earnings Growth Over 50% Expected
First-quarter earnings grew for the third quarter in a row, with an impressive 180% increase over last year's Q1. Recent quarterly growth helped the stock earn a best-possible 99 IBD EPS Rating.
Sales grew 55%, following gains of 97% and 52% in the previous two quarters. Management raised its full-year 2023 revenue guidance to a range of $480 million to $510 million, from $470 to $510 million.
Gross profit margin rose to 45.9% vs. 38.7% over the prior-year period. The improvement was partly from increased sales of higher-margin products and lower raw materials costs.
Analysts expect 53% EPS growth this year with an additional 59% gain next year, which follows the 68% growth in 2022. That's outstanding annual growth.
Funds Jump Onboard
Mutual funds own 76% of shares of the solar stock, with 639 in March, up from 623 in December and 531 in September.
IBD Mutual Fund Index fund Allspring Growth Fund (SGRAX) added 1.54 million shares of SHLS and Invesco Discovery Fund (OPOCX) added 920,000 shares, while Lord Abbett Developing Growth Fund (LAGWX) trimmed 610,000 shares in March.
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