- Shoals Technologies Group (SHLS) stock offers exposure to the solar industry, but in a different way than many other investments.
- The share price is far from its peak, but a Wall Street expert offers an encouraging outlook.
- Investors with strong appetites for risk should bulk up their renewables market holdings with shares of Shoals.
Headquartered in Tennessee, Shoals Technologies Group (NASDAQ:SHLS) is involved in the solar equipment industry. This is a great time to consider adding SHLS stock to your ESG (environmental, social and governance) friendly portfolio.
It’s tempting for renewables-focused investors to focus entirely on businesses that specialize in making solar panels. Yet, even within an industry as specific as solar power generation, it’s possible to diversify.
Shoals offers investors a different angle on the solar market, as well as exposure to a revenue-rich business. There’s always risk when speculating on burgeoning industries, but Shoals Technologies Group is demonstrably in growth mode – and the shares could make a sizable move, according to at least one analyst on Wall Street.
What’s Happening with SHLS Stock?
Frustratingly, SHLS stock has bumped its head on $35 multiple times over the past 12 months. We’ll refer to that dollar figure again later, but for now, it’s worth noting that $35 is a stubborn resistance level.
Lately, the Shoals Technologies Group share price has been much lower than $35. Hence, a major re-rating of the stock could be in the cards if there’s a buying spree in the near future.
But let’s not get ahead of ourselves. First, we have to understand what the company does, right?
To sum it up, Shoals provides electrical balance of system (EBOS) solutions for solar energy projects in the U.S. According to the company, EBOS solutions include “all of the components that are necessary to carry the electric current produced by solar panels to an inverter and ultimately to the power grid.”
Think of cable assemblies, wireless monitoring systems, splice boxes, transition enclosures and other essential solar power components. Owning SHLS stock is a picks-and-shovels type of investment, as you’d get exposure to the necessary peripheral equipment, rather than the primary item that most investors focus on.
Suffice it to say that Shoals is a fast-growing company. In fact, Shoals Technologies Group just opened a new, 219,000-square-foot facility in Portland, Tenn., to further optimize the company’s EBOS manufacturing processes and expand its production capacity.
Among other benefits, the new facility will enable Shoals Technologies Group to “bring new innovations to market to deliver even more value to our customers,” according to CEO Jason Whitaker.
A Strong Indicator of Demand
Sure, Shoals is committed to being an innovator, but is the company a revenue generator?
As always, we should let the data make the case. During 2021’s fourth quarter, Shoals Technologies Group reported $48 million in revenue, for a 24% year-over-year increase. Also during that quarter, Shoals’ gross profit grew 7% to $15.9 million.
Moreover, it’s evident that Shoals Technologies Group has been fielding a lot of orders. At the end of 2021, Shoals’ backlog and awarded orders totaled $299 million, a record for the company. This figure also signifies an increase of 94% compared to the end of 2020.
Perhaps J.P. Morgan analyst Mark Strouse had those statistics in mind when he opined that Shoals’ backlog is a “strong indicator” of demand and observed that the company’s customer count “continues to build.”
With that, Strouse assigned SHLS stock an “overweight” rating, along with a price target of $35 – a number we’ve seen before, and may see again in 2022.
What You Can Do Now
Strouse’s recommendation should inspire confidence in Shoals Technologies Group, even among solar-market skeptics. Moreover, for investors, this company offers an alternative to the many companies that simply make solar panels.
There’s certainly no guarantee that SHLS stock will reach $35 in the coming months. That’s a realistic number to target, though, as long as you’re willing to be patient and accept the risks. So, feel free to pick up a few shares of Shoals Technologies Group while they’re reasonably priced.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
