Street Initiates Coverage of Shoals (SHLS), Ratings Lean Positive

Wall Street initiated the coverage of Shoals Technologies Group (NASDAQ: SHLS) with a bag of mixed ratings, although the ratio was 5:3 positive.

A group of firms, namely Oppenheimer, UBS, Barclays, Guggenheim, and JP Morgan, started the coverage with a “Buy” or equivalent rating. On the other hand, analysts at Goldman Sachs, Credit Suisse, Cowen, and some others preferred to stay on the sidelines.

Oppenheimer analyst Colin Rusch sees SHLS as a “leader in the electrical balance of system (EBOS) market for solar power systems.” Rusch writes that the company has a history of innovation and bringing value-added products to market with defensible IP.

“SHLS's elegantly designed cable connector and management system has established itself as a leader in electrical balance of system (EBOS) products SHLS’s technology eliminates labor from the installation process, specifically electrician time in the field. We estimate Shoals’ solutions offer ~25% lower equipment cost and 40%+ lower installation cost,” the analyst wrote in a note.

“We continue to see solar as the lowest cost of new energy capacity currently with power purchase agreements (PPAs) being signed at <$0.015/kwh. We see double-digit annual growth near-term and see the potential for a much wider replacement cycle and growth trajectory as companies and countries begin to take concrete steps toward net-zero emissions targets,” he adds.

The analyst, who rates the stock with an “Outperform” rating and price target of $46.00 per share, takes note of the potential for the company to move into adjacent opportunities in the EBOS space. This could lead to expanding the TAM from ~$0.02/W to ~$0.035/W.

Similarly, Guggenheim analyst Shahriar Pourreza started the coverage with a “Buy” rating and $48.00 PT.

“Our very bullish view stems from growth in the ground-mount solar market in the U.S. and globally paired with our view that labor costs are the next leg of cost reductions for solar, which SHLS tackles with its patented plug-n-play technology that cuts down on installation time and removes the need for skilled labor on the project site,” Pourreza said in a memo.

“SHLS is emerging as the dominant provider of solar EBOS systems in the US and is just beginning to tap the international markets, bringing the same benefits and cost reductions as seen in the US. Barriers to entry are robust as SHLS has a broad range of patents, proprietary manufacturing, and a rapidly growing share of the market. Storage and EV represent additional opportunities for growth over the medium to long term,” he concludes.

You May Also Be Interested In

• TD Cowen Resumes EQT Corp. (EQT) at Hold
• RBC Capital Starts Inspire Medical Systems (INSP) at Outperform
• Loop Capital Starts DoorDash Inc. (DASH) at Buy, 'Category Killer with Stellar Execution'