Global Solar And Tracker Trends Will Redefine Energy Deployment

Key Takeaways

• Expansion into digital services and advanced technologies is enabling Nextracker to diversify revenue streams and increase earnings stability.
  
• Growing global adoption of solar and advanced trackers, supported by policy and improved economics, drives strong order momentum and wider market reach.
  
• Policy uncertainty, cost pressures, market concentration, rising competition, and shifting technology could all undermine Nextracker's revenue stability, margins, and long-term growth.

Catalysts

Provides solar tracker technologies and solutions for utility-scale and distributed generation solar applications in the United States and internationally.

• The rapid global expansion of solar power as the dominant new source of electricity generation, coupled with long-range policy support and improved solar economics, points to a sustained multi-year period of robust order growth; Nextracker's record backlog of $4.75 billion and ongoing bookings momentum signal strong forward revenue visibility.
  
• Nextracker's continued leadership in tracker technology-demonstrated by rapid market adoption of new solutions (e.g., Hail Pro, XTR series) and integration of AI and robotics-positions the company for enhanced pricing power and supports margin expansion through higher-value, differentiated offerings, likely improving net margins and long-term earnings growth.
  
• Strategic expansion into value-added digital services and asset management through recent acquisitions (e.g., robotics, AI-driven inspection, digital twins) is expected to create new high-margin, recurring revenue streams, supporting both revenue diversification and increased earnings stability.
  
• The continued decline in levelized cost of solar (LCOE) is making utility-scale solar increasingly cost-competitive, expanding Nextracker's addressable market as more global geographies and customers opt for solar with advanced tracker solutions, driving topline growth.
  
• Geographic diversification beyond North America-with growing market share in Europe, Latin America, and emerging regions-reduces dependency risk, broadens the sales pipeline, and supports consistent revenue expansion even as specific markets experience policy or permitting uncertainties.

Nextracker Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Nextracker's revenue will grow by 12.3% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 17.2% today to 14.8% in 3 years time.
• Analysts expect earnings to reach $621.7 million (and earnings per share of $4.19) by about July 2028, up from $509.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.4x on those 2028 earnings, up from 18.8x today. This future PE is lower than the current PE for the US Electrical industry at 27.3x.
• Analysts expect the number of shares outstanding to grow by 1.97% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.06%, as per the Simply Wall St company report.

Nextracker Future Earnings Per Share Growth

Risks

• Regulatory uncertainty-such as pending treasury guidance on safe harbor provisions, the expiration of tax credits (ITC), and changing U.S. policy or executive orders-could impact customer investment behavior and project timing, potentially resulting in delays or cancellations that negatively affect Nextracker's revenue and earnings.
  
• Ongoing cost pressures-including higher costs for U.S.-made content, potentially offset by current tax credits-may compress margins if incentives are reduced or phased out, or if Nextracker cannot sustain competitive pricing relative to lower-cost international tracker manufacturers, impacting long-term net margins.
  
• Market concentration in the U.S. and reliance on a small group of Tier 1 customers create concentration risk, where a slowdown, policy disruption, or loss of a key client in a major market could generate significant revenue and earnings volatility.
  
• Increasing competition and potential commoditization of tracker and associated solar technologies-driven by both established global competitors and new lower-cost entrants, particularly from Asia-may pressure pricing, erode Nextracker's market share, and reduce both revenue growth and net margins over time.
  
• Shifts in long-term technology or grid dynamics-such as the rise of cheaper energy storage solutions, evolving regulatory environments, or possible reduction of large-scale government support for solar-could reduce the pace or scale of utility-scale solar deployment, constraining Nextracker's addressable market and long-term revenue growth.

Valuation

• The analysts have a consensus price target of $67.5 for Nextracker based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $97.0, and the most bearish reporting a price target of just $38.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.2 billion, earnings will come to $621.7 million, and it would be trading on a PE ratio of 21.4x, assuming you use a discount rate of 8.1%.
  
• Given the current share price of $64.9, the analyst price target of $67.5 is 3.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.