Shares of troubled Nextracker jumped on Thursday, the morning after it posted strong quarterly results and raised its full-year profitability forecast for the solar company and its project backlog. LSEG reported second-quarter fiscal 2025 revenue of $635.6 million, up nearly 11% year-over-year and beating the consensus estimate of $615.4 million, marking seven consecutive quarters of double-digit revenue growth. Adjusted earnings per share (EPS) of 97 cents for the three months ended Sept. 27 rose 49% year over year and easily beat estimates of 61 cents, LSEG data showed. NXT Mountain Nextracker year-to-date to date. Shares soared about 22% on Thursday, erasing some of the sharp losses of recent months. Nextracker lost about 32% of its value between its August earnings report and Wednesday’s close, a disappointing decline. In addition to the disappointing comments surrounding the August release, uncertainty surrounding the presidential election has weighed on stocks and the solar complex in recent months. Bottom line: This was a release with a sigh of relief. For now, we maintain a ‘2’ rating on the stock, equivalent to a Hold, as the election looms. It’s too early to do anything, given that the results of next week’s competition could significantly move the stock of Nextracker and its peers. Overall, analysts believe Republican changes in the presidency, Senate and House would be the most bearish near-term outcome for solar stocks. “We were pleasantly surprised and pleased that this was the best solar revenue we’ve seen this quarter,” Jim Cramer said Thursday. “Red states and blue states support solar, so it shouldn’t be so political.” Nextracker Why We Own It: Nextracker develops industry-leading tracking technology that allows large-scale solar panel installations to track the sun’s movements and increase power generation. The company’s shares have been volatile and disappointing, but we view this investment as a long-term bet on rising electricity demand driven in large part by artificial intelligence computing. Competitors: Array Technologies Club Portfolio Weight: 0.72% Started: June 27, 2024 Last Purchase: July 3, 2024 Perhaps the best part of the Nextracker report was the increase in the order book—even more so than the revenue and profit numbers. Why? Because questions about Nextracker’s underperformance have overshadowed its stronger-than-expected results in August. On Wednesday evening, another, more encouraging story occurred. Nextracker said its record order book now stands at more than $4.5 billion, with approximately 90% expected to be delivered over the next eight quarters. In August, the company described its backlog as “more than $4 billion” for the second quarter in a row, adopting slightly different language about its timing that spooked investors. At the time, executives said 80% would be realized “within” the next eight quarters, although they had previously said it would be “within” eight quarters. “We’re getting orders with shorter time horizons, and that’s what has driven the backlog and caused that number to go from 80% to 90%,” Nextracker President Howard Wenger said during the earnings call. The change, which took place in August, came as the project’s life cycle became slightly longer due to the permitting process and interconnection, the industry term for connecting a solar field to the wider electrical grid. Regardless of the reasons, investors, including us, did not appreciate the change at this time and in the difficult weeks of trading that followed. Another development that caught our attention in Wednesday night’s release: Nextracker TrueCapture software license sales accounted for more than 2% of revenue in the quarter, leading to improved profitability as it generates higher margins than hardware. CFO Chuck Boynton said software revenue in the second quarter of fiscal 2025 “will likely not be repeated” in the third and fourth quarters. “Our plan is that it will be between 1% and 2%. In the previous quarter, Nextracker characterized TrueCapture’s revenue as “immaterial” to its results. Now it is being quantified. Finally, Nextracker said it will begin shipping at 100%. solar trackers of domestic production by the end of calendar 2024 – previously the delivery date was planned for the beginning of next year. This could make its products more attractive to customers as they can take advantage of the 10% investment tax credit included in the price. Inflation Reduction Act of 2022. Nextracker management reiterated its fiscal 2025 earnings guidance while raising its guidance on several profitability metrics. Here’s where things stand now: 2025 revenue forecast: $2.8 billion to $2.9 billion. 2025 Adjusted EBITDA Forecast: $625 million through 2025. $665 million, up from $600 million to $650 million (EBITDA is short for earnings before interest, taxes, depreciation and amortization). Adjusted 2025 EPS forecast: $3.10 to $3.30, up from $2.89 to $3.09. the earnings forecast was repeated quite well. That’s because it means “customer failures that other solar OEMs have suffered will not impact their supply visibility,” OEM analysts at Mizuho Securities wrote in a note to clients. OEM is short for original equipment manufacturers. The firm has confirmed its Top on Nextracker and Buy Equivalent rating. We are not so optimistic. However, analyst comments and market reaction on Thursday are a positive development. (The Jim Cramer Charitable Foundation is long NXT. See the full list of stocks here.) As a subscriber to CNBC’s Investment Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling shares in his charity portfolio. If Jim talked about a stock on CNBC, he would wait 72 hours after the trade alert was issued before making a trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY AS WELL AS OUR DISCLAIMER. 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Problem shares Nexttracker jumped on Thursday, the morning after posting strong quarterly results and raising the solar company’s full-year profitability forecast and project backlog.
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