By Investing.com — Morgan Stanley upgraded Shoals Technologies Group Inc (NASDAQ:SHLS) to Overweight from Equal Weight, while brokerage kept its price target at $7 per share, translating into a 60% upside.
MS cited increased confidence in Shoals’ execution heading into 2025, with earnings downgrade cycle is nearing its end, while the stock’s valuation, at near all-time lows, already reflects risks tied to the incoming Trump administration.
Shoals is a provider of electrical balance-of-system solutions for utility-scale solar, which is expected to benefit from its strong free cash flow profile, about $84 million for 2025 and $280 million cumulatively through 2027.
Unlike peers such as Array Technologies and First Solar (NASDAQ:FSLR), Shoals is less reliant on the Inflation Reduction Act’s manufacturing tax credits, making its earnings outlook cleaner and more resilient.
The upcoming final determination on Shoals’ patent infringement case against Voltage, expected in January 2025, is seen as a potential clearing event for the stock. A favourable ruling could ease a major overhang, as Shoals has secured new patents to defend against Voltage’s alternate designs.
While growth in utility-scale solar has moderated due to supply chain bottlenecks, Morgan Stanley (NYSE:MS) noted that Shoals’ conservative 2025 guidance and focus on blocking and tackling could drive outperformance.
Management has also emphasized business diversification through market expansion and bolt-on acquisitions while keeping an open stance on share buybacks with $125 million authorization outstanding.