Nextracker (NASDAQ: NXT) shares surged more than 10%, giving signs of bottoming and reversal that could return the market to its all-time highs. The surge is driven by strength in results, including a solid outlook for demand and a growing backlog that will keep the company business for the next few years. There are hurdles for the market, technical and fundamental, but each should be overcome in time. The takeaway is that this stock is a value among tech stocks, green energy stocks, and solar stocks, which generally aren’t making money. Nextracker is.
Nextracker Shines in Q4, Issues Robust Guidance
Nextracker isn’t the run-of-the-mill solar energy stock making solar panels and producing loss after loss as it tries to rationalize its business. Nextracker makes solar panel mounting and sun-tracking stands, software, and services that resonate with the industry because they enhance efficiency, maximize output, and improve operational quality for solar farms.
The Q4 results are highlighted by $736.5 million in revenue, up 42% compared to last year. The take is 760 basis points ahead of the consensus figure reported by Marketbeat.com and is compounded by a wider margin and a favorable outlook.
Margin widened at the gross and operating levels due to increased revenue leverage, cost controls, and supply chain efficiency. Gross margin came in at 46% compared to last year’s 17%, providing leverage to the bottom line. Operating income surged by 575%, adjusted EBITDA by 120%, and adjusted EPS by quadruple digits. The 96 cents in adjusted EPS is up from last year’s two cents, outpaced the consensus by 27 cents or 4000 basis points, and plays into the idea that guidance is cautious.
The company forecasts revenue near $2.85 billion compared to the $2.8 consensus, with earnings showing similar strength. Reasons to think the guidance is cautious include the Q4 outperformance, the expected slowdown in growth, and the rapidly increasing backlog. The company’s backlog nearly doubled compared to last year, coming in at $4 billion, and is enough to keep the business in operation for more than a year at the Q4 pace. Because the company is investing in production and the backlog is still growing, growth above 14% should be easily reached.
Analysts' Response is Mixed but Leading the Market Higher
The analysts' response to the release is mixed but can still lead the market higher. The revisions tracked by Marketbeat.com include a few lowered price targets, an upgrade to Outperform, and several price target increases that include a new high target of $72. The takeaway is that the analysts' community views this stock as a Moderate Buy with a minimum 17% upside potential. The $57.50 consensus target is also significant because it aligns with the upper end of the established trading range; a move to that level opens the door to a retest of resistance at the all-time high and possibly a fresh high.
Shares of Nextracker surged more than 10% on the news and are showing signs of a bottom. The caveat is that resistance to higher prices remains strong at lower levels and may provide hurdles for the action this summer. However, support also appears solid at the convergence of three moving averages, as seen in the MACD and stochastic indicators. MACD and stochastic align with an outlook for bottom and reversal but may not lead to higher prices. If the market cannot get above critical resistance at $50, it may remain depressed until later in the year or other news emerges.
