Global Electrification And Renewables Will Unlock New Markets

Key Takeaways

• Growth is fueled by expanding global demand for utility-scale solar, international diversification, and new high-value product offerings targeting higher-margin market segments.
  
• Operational efficiencies from upgraded manufacturing and broadening customer relationships drive improved profitability, expanded margins, and confidence in sustained revenue growth.
  
• Shoals faces significant risks from policy shifts, supply chain volatility, customer concentration, margin pressure from global competition, and potential market contraction due to alternative technologies.

Catalysts

Provides electrical balance of system (EBOS) solutions and components in the United States and internationally.

• Shoals is positioned to benefit from acceleration in utility-scale solar installations due to rising global electricity demand—driven by increased electrification (data centers, AI, transportation and industrial loads)—which directly expands the company’s addressable market and supports higher multi-year revenue growth.
  
• The company's expanding international presence, highlighted by its 12-gigawatt MOU with UGT Sun Africa, recent wins in Australia and Chile, and the ability to serve geographies requiring domestic content, provides an additional growth driver outside the U.S., diversifying and increasing long-term revenues.
  
• Shoals’ ramp-up of innovative, higher-value products—such as advanced plug-and-play EBOS solutions and battery energy storage system (BESS) products—enables entry into new market segments and captures higher-margin opportunities, improving future gross margins and overall profitability.
  
• Significant investments in a new state-of-the-art manufacturing facility, upgraded automation, and supply chain consolidation are expected to drive operational efficiency and lower per-unit costs, which should expand net margins and support stronger earnings as volume scales.
  
• The company’s deepening customer base—evidenced by the addition of large EPCs and the securing of new business with major OEM partners and direct data center customers—alongside persistent backlog growth and robust project pipelines, provides visibility and confidence in sustained revenue growth and improving operating leverage.

Shoals Technologies Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Shoals Technologies Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Shoals Technologies Group's revenue will grow by 18.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.9% today to 21.0% in 3 years time.
• The bullish analysts expect earnings to reach $135.6 million (and earnings per share of $0.67) by about July 2028, up from $19.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 15.6x on those 2028 earnings, down from 52.6x today. This future PE is lower than the current PE for the US Electrical industry at 28.7x.
• Analysts expect the number of shares outstanding to grow by 0.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.43%, as per the Simply Wall St company report.

Shoals Technologies Group Future Earnings Per Share Growth

Risks

• Shoals remains exposed to shifts in U.S. and global policy support for renewables—any reduction in tax incentives or a shift in political stance could lead to solar project cancellations or delays, reducing Shoals’ future backlog and revenue growth.
  
• While Shoals touts its domestic supply chain, the company still relies on some imported components; further escalation in geopolitical tensions or supply chain shortages could increase material costs and disrupt production, leading to margin compression and delivery interruptions.
  
• The concentration of Shoals’ revenues with a small number of large EPCs and developers presents a pronounced risk—loss of a major customer, consolidation among EPCs, or shifts in procurement preferences could create sudden, steep declines in revenue.
  
• Shoals’ gross margins have recently eroded due to product mix and strategic pricing actions, and the continued trend toward commoditization of EBOS components by lower-cost international competitors will pressure margins and weaken future earnings.
  
• Shoals’ growth narrative hinges on new market entry and product diversification, but if alternative technologies like next-generation energy storage or offshore wind capture investment interest, Shoals’ core utility-scale solar addressable market could shrink, limiting both top-line growth and long-term earnings potential.

Valuation

• The assumed bullish price target for Shoals Technologies Group is $9.87, which represents two standard deviations above the consensus price target of $6.78. This valuation is based on what can be assumed as the expectations of Shoals Technologies Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $11.0, and the most bearish reporting a price target of just $4.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $645.7 million, earnings will come to $135.6 million, and it would be trading on a PE ratio of 15.6x, assuming you use a discount rate of 8.4%.
• Given the current share price of $6.0, the bullish analyst price target of $9.87 is 39.2% higher.
• 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.