On Tuesday, Roth/MKM maintained a Buy rating on Shoals Technologies Group (NASDAQ:SHLS) but reduced the stock price target from $20.00 to $15.00. The firm noted that the stock has experienced a significant decline of over 40% since the fourth-quarter results, underperforming the broader solar industry index, which saw a decrease of 7% in the same period. The analyst cited a lack of immediate catalysts that could contribute to a recovery in the share price.
Shoals Technologies, which specializes in electrical balance of system solutions for solar energy projects, is expected to report earnings that align with market expectations. Still, the firm anticipates that there may not be any positive surprises in terms of bookings, which are the orders the company receives for future revenue. The analyst suggests there could even be a slight downside risk to bookings due to the current slowdown in the U.S. utility-scale solar market.
Despite these challenges, Roth/MKM believes that the company's guidance for 2024 remains reliable at this time. The firm's stance indicates a level of confidence in Shoals Technologies' long-term prospects even as it faces near-term headwinds.
The market is expected to have a clearer view of the company's position following the initial determination in the Section 337 investigation in July, which could be a potential turning point for the stock.
The Section 337 investigation refers to a type of trade-related investigation conducted by the United States International Trade Commission (USITC). The outcome of such investigations can impact companies if they are found to be involved in unfair trade practices, such as patent infringement or other intellectual property violations.
In conclusion, Roth/MKM's revised stock price target reflects a more conservative outlook on Shoals Technologies' near-term performance while still endorsing the stock with a Buy rating. The market's attention is likely to remain on the company's upcoming earnings report and the impending USITC decision.
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