Morgan Stanley Upgrades Shoals Technologies
Investing.com — Morgan Stanley upgraded Shoals Technologies Group Inc (NASDAQ:SHLS) from Equal Weight to Overweight, maintaining a price target of $7 per share, indicating a 60% upside potential.
The firm cited increased confidence in Shoals’ performance as it approaches 2025, noting that the earnings downgrade cycle is nearing its end. The stock is currently valued at near all-time lows, reflecting risks associated with the incoming Trump administration.
Shoals is known for providing electrical balance-of-system solutions for utility-scale solar, with projections indicating strong free cash flow of approximately $84 million for 2025 and a cumulative $280 million through 2027.
In contrast to competitors like Array Technologies and First Solar (NASDAQ:FSLR), Shoals is less dependent on the Inflation Reduction Act’s manufacturing tax credits, which enhances its earnings outlook.
The final determination of Shoals’ patent infringement case against Voltage, expected in January 2025, is viewed as a pivotal event for the stock. A favorable ruling may alleviate a significant burden as Shoals has obtained new patents to counter Voltage’s alternative designs.
While growth in utility-scale solar has slowed due to supply chain issues, Morgan Stanley noted that Shoals’ cautious guidance for 2025 and its focus on fundamental operations could lead to outperforming expectations.
Management has also highlighted plans for business diversification through market expansion and acquisitions, and is considering share buybacks with an outstanding authorization of $125 million.
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