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Shoals Technologies (NASDAQ:SHLS) +2.2% in Friday’s trading as Piper Sandler upgraded the solar energy equipment maker to Overweight from Neutral with a $28 price target after the stock’s recent pullback.
Shoals’ (SHLS) recent drop is in part driven by weakness from higher interest rates, Piper’s Kashy Harrison said, but due to long project cycle times, she see less risk to industry growth during 2024 and expects Shoals (SHLS) will reiterate the strong demand environment for its products and services.
Harrison also is optimistic on Shoals’ (SHLS) gross margin trajectory entering H2 2023 due to lower warranty charges as well as a higher systems revenue mix partially offset by manufacturing startup expenses.
At current stock levels, Harrison said DCF suggests that Shoals (SHLS) is being priced with a 9%-13% revenue compound annual growth rate, which “suggests the current equity valuation captures the core domestic solar wiring solution business with minimal upside for new business initiatives.”
Shoals (SHLS) joined First Solar (FSLR), Array Technologies (ARRY) and Ameresco (AMRC) with Overweight ratings in Piper Sandler’s renewable and alternative energy coverage area.
