On Friday, Goldman Sachs (NYSE:GS) reaffirmed its Buy rating on shares of Shoals Technologies Group (NASDAQ:SHLS), maintaining a price target of $11.00. The firm's optimism is based on the company's potential for long-term growth, as discussed during Shoals' first-ever Analyst Day. The company has set a target for a compound annual growth rate (CAGR) of 12%-18% through 2027, driven by gains in its core US utility-scale segment, new market and product opportunities, and international expansion.
Shoals Technologies aims to capitalize on emerging opportunities in commercial, community, and industrial sectors, such as distributed generation (DG), battery storage, and data centers. Despite acknowledging near-term growth challenges related to labor, permitting, interconnect delays, and high interest rates, the company noted signs that these issues might ease compared to first half of 2024 trends.
During the Analyst Day, Shoals Technologies also highlighted a preliminary favorable ruling from the International Trade Commission (ITC) in its patent infringement case against competitor Voltage. However, Voltage's simultaneous announcement claiming victory in the intellectual property case led to a roughly 10% decline in Shoals' stock price. Goldman Sachs addressed the discrepancy, suggesting that it contributed to the stock's recent drawdown and investor sentiment remains cautious.
Goldman Sachs views the current situation as presenting one of the more attractive risk-reward profiles within its coverage, particularly in light of what it anticipates could be a period of volatile short-term execution trends for Shoals. The firm's continued endorsement of a Buy rating reflects its confidence in the company's strategic direction and growth targets as outlined during the Analyst Day event.
In other recent news, Shoals Technologies has been navigating a series of significant developments. The company reported a year-over-year decrease in second-quarter revenue by 16.7% to $99.2 million, due to project delays. However, Shoals Technologies secured a substantial Master Supply Agreement with Blattner, expected to generate approximately $636 million in revenue through 2027.
Shoals Technologies also won a key patent case against Voltage, LLC, a development that analysts from Oppenheimer and Roth/MKM believe could strengthen Shoals Technologies' market and intellectual property positions.
Despite these developments, Citi maintained its Sell rating on Shoals Technologies, while Piper Sandler adjusted its price target for the company from $11.00 to $8.00, maintaining an Overweight rating. Also, Jefferies initiated coverage on Shoals Technologies with a Hold rating, citing concerns about the slowing utility-scale solar industry.
These are the latest developments for Shoals Technologies, which continues to implement strategies to capture an untapped 30% of the market, potentially adding over 30 gigawatts of capacity in the next three years.
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