mid-cap

Is it Prudent to Sell This Solar Energy Stock – SHLS

Feb 13, 2024 | Team Kalkine

Read Time :5 min

Is it Prudent to Sell This Solar Energy Stock – SHLS

SHLS:NASDAQ

Investment Type

Mid - Cap

Risk Level

Action

Rec. Price (US$)

Shoals Technologies Group, Inc.

SHLS Details

Shoals Technologies Group Inc (NASDAQ: SHLS) is the provider of electrical balance of system or EBOS solutions for solar energy projects, primarily in the United States.

Financial Results

SHLS released financial results for its 3Q ended September 30, 2023. Its revenue rose by 48% YoY, setting the new company record. The backlog and awarded orders witnessed a rise of 34% YoY and 16% sequentially to the company record of $633.3 Mn as the Company added more than $220 Mn in orders in the quarter.
Its gross profit stood at $14.2 Mn as compared to $36.0 Mn in the prior-year period. Gross profit as the percentage of revenue fell to 10.5% from 39.7% in the prior-year period, mainly because of $50.2 Mn in wire insulation shrinkback expenses, slightly offset by lower raw materials input costs, higher leverage on fixed costs as well efficiencies gained in operations.
Net loss of the company was $(9.8) Mn as compared to net income of $12.8 Mn during the same period in the prior year.

Key Update

SHLS announced that the company would be releasing its Q4 FY 2023 results after market close on February 28, 2024.

Outlook

For FY 2023, SHLS is expecting revenue of between $485 Mn - $495 Mn and adjusted EBITDA of between $165 Mn - $175 Mn. Adjusted net income of the company is expected between $110 Mn - $120 Mn.

Key Risks

Lower than expected growth in demand for solar energy projects as well as EV charging infrastructure, failure to recover the costs and expenses, etc. are some of the risks.

Fundamental Valuation

Stock Recommendation

Over the last three months, the stock has given a return of 25.7%. The stock has made a 52-week low and high of USD 12.11 and USD 28.34, respectively. The company’s performance is exposed to the risks related to the global slowdown as well as geopolitical tensions. Also, macroeconomic events, such as heightened inflation, higher interest rates as well as the potential recession could impact its business. Notably, supply chain challenges, due to additional duties and charges on imports and exports, could impact operations. Therefore, investors should exit the stock.

Hence, a ‘Sell’ rating has been provided on the stock at the closing price of USD 17.02 per share, up by 3.15% as on 12^th February 2024.

Technical Overview:

Daily Price Chart

SHLS Daily Technical Chart, Data Source: REFINITIV

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for share price chart and stock valuation is based on February 12, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

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