Guggenheim says Shoals Technologies is poised to see big market share gains as demand grows. Analyst Joseph Osha upgraded Shoal shares to buy from neutral. His price target of $30 per share implies 52.1% upside from Monday’s close price. “SHLS delivered Q1 results that exceeded our estimates, notably at the gross margin line. It appears that the company is benefiting more than we expected as revenue shifts to combine-as-you-go products, and we also believe that falling material prices are having an impact,” Osha wrote in a Tuesday note. Shoals produces electric balance of system, or EBOS, components for solar energy projects. The company also makes products for the electric vehicle charging market. Shoals reported its first-quarter earnings Monday. The solar energy tech company’s adjusted first-quarter earnings and revenue topped analysts’ estimates. “The company also modestly raised and tightened its financial targets for the year. At the same time, we note that valuation for SHLS has become more attractive, with the stock down 17% since the beginning of the year as compared to an 8% increase for the S & P500 over the same time period,” said Osha. “Demand is solid, but we think SHLS’s success is also driven by market share gains. We believe that relatively more of SHLS’s growth is coming from market share gains as opposed to unexpected strength in utility-scale solar,” he said. The analyst noted that Shoals hasn’t been willing to offer any details on the magnitude of its other business efforts besides solar energy. He added that he modeled the company’s outlook regarding energy storage “as essentially an extension of the solar business.” “New customer initiatives include efforts in energy storage and EV charging. Although these are large markets, they are also subject to considerable policy-driven uncertainty, which has the potential to disrupt the industry outlook and by extension SHLS’ business,” said Osha. Shares soared almost 19% Tuesday during premarket trading. Although shares are down 2023 in 2023, they remain up more than 60% through a 12-month period. — CNBC’s Michael Bloom contributed to this report.
