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VOLUME


Shoals Technologies - The New Solar Kid In Town

02/25/21 12:41:19 PM
by Matt Blackman

Company goes public facing strong industry headwinds.

Security:   SHLS
Position:   N/A

Shoals Technologies Group Inc. which bills itself as "a leading provider of electrical balance of systems ("EBOS") solutions for solar, storage, and electric vehicle charging infrastructure," began trading January 27 at an initial offering (IPO) price of $25. It opened at $31.30 and by the close February 22 had gained more than 31%.

What makes the move more interesting is that it occurred while the solar sector and industry leaders were either flat, as was the case with Solar Edge (SEDG), or were down by more than 33%, as was the case with SunPower Corp (SPWR). The challenge now facing the industry is that although green technology stocks performed very well following the US election, that trend appears to have hit a wall mid-February. Solar industry ETF (TAN) rose more than 80% from $68 November 5 in an attempt to break through resistance at $125 on three separate occasions before finally dropping back to $103 by February 22. Conditions decidedly worsened as February began to fade.

Figure 1. Daily chart of Shoals Technologies Group Inc. showing how itís performed since going public on January 27 up 31% versus the Solar Industry (purple) down 9%.
Graphic provided by: Freestockcharts.com.
 
Shoals Technologies has been around since 1996 building technologies and systems solutions for customers to substantially increase installation efficiency and safety while improving system performance and reliability according to the news release (below). Fundamentally, the company reported revenue of $144.49 million with a gross profit of $44.12 million in 2019, up from revenues of $103.75 million and a profit of $28.17 million in 2018. Earnings per share were $0.28 in 2019, up nearly triple from 2018 according to data from Macrotrends.net. Going public should provide it with much needed capital to grow revenues.

Another positive is that as of the latest stock data, insiders held 84% of SHLS stock.

Figure 2. Daily of Shoals (SHLS) compared to major solar companies Solar Edge (SEDG), Canadian Solar (CSIQ) First Solar (FSLR) and SunPower (SPWR), which is down 33% since January 27, 2021.
Graphic provided by: Freestockcharts.com.
 
The billion dollar question now facing investors and traders is whether the late February downturn is simply a small correction or indication of more headwinds to come for the industry and/or markets.

If Shoals Technologies is to remain a stock leader, what it does from here will determine if recent out-performance was simply IPO euphoria or something more sustainable. Price holding support around $36 followed by a decisive breach of resistance above $40 on strong buying volume would confirm bullish action. Otherwise it would be best to wait for a new buy signal and more positive market conditions.

Suggested Reading:

Shoals Technologies Group, Inc. Announces Closing of Initial Public Offering

Shoals Technologies Financial Statements - Macrotrends.net



Matt Blackman

Matt Blackman is a full-time technical and financial writer and trader. He produces corporate and financial newsletters, and assists clients in getting published in the mainstream media. Matt has earned the Chartered Market Technician (CMT) designation. Follow Matt on Twitter at www.twitter.com/RatioTrade

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