Market Overreaction to Nextracker’s Acquisition of Bentek: Shoals Technologies Group’s Buy Rating Justified

Andrew Percoco, an analyst from Morgan Stanley, maintained the Buy rating on Shoals Technologies Group (SHLS – Research Report). The associated price target remains the same with $6.00.

Andrew Percoco has given his Buy rating due to a combination of factors that suggest the market’s reaction to recent events is exaggerated. The acquisition of Bentek by Nextracker has sparked concerns about increased competition for Shoals Technologies Group. However, Percoco highlights that Bentek’s product offerings differ significantly from those of Shoals, with Bentek focusing more on combiner boxes rather than wiring solutions, which is Shoals’ core strength.
Furthermore, Bentek’s wiring product, the Insulation Piercing Connector, does not match the value proposition of Shoals’ BLA solution, which offers benefits like reduced labor costs and faster installation. Despite acknowledging the potential risks posed by Nextracker’s scale and market presence, Percoco believes that the threat to Shoals’ market leadership is overstated. Therefore, the recent decline in Shoals’ stock price is seen as an overreaction, supporting the Buy recommendation.

In another report released on May 13, RBC Capital also maintained a Buy rating on the stock with a $7.00 price target.