BoA: Nextracker to Rally 39%, First Solar Gains Amid Tariffs

Bank of America projects Nextracker's stock to rally nearly 40%, amid strong earnings and a $4 billion order backlog for FY2024.

By Bill Bullington

5/16, 11:58 EDT
EQT Corporation
Ford Motor Company
First Solar, Inc.
General Motors Company
Kinder Morgan, Inc.
Southern Company
DBA Sempra

Key Takeaway

  • Bank of America raises Nextracker's stock price target to $64, forecasting a 39% rally due to strong earnings and a $4 billion order backlog.
  • Tariffs on Chinese imports could boost demand for domestic goods, with First Solar among the key beneficiaries, seeing its stock rise nearly 9%.
  • Goldman Sachs predicts a significant increase in U.S. power demand by 2030, favoring stocks like First Solar with a potential 43.3% upside.

Nextracker's Earnings Momentum

Nextracker has reported earnings that exceeded estimates for the fourth consecutive quarter, showcasing a robust performance with a growing backlog of orders valued at $4 billion for its 2024 fiscal year. Bank of America analyst Dimple Gosai has raised the stock price target for Nextracker to $64 from $60, indicating a 39% upside potential from the previous close. This adjustment reflects confidence in Nextracker's ability to outperform its targets, potentially leading to an expansion in its market valuation. The company, known for its solar tracking devices, reported quarterly revenue of $737 million, surpassing Bank of America's estimate of $676 million. Despite competitive market pressures, Nextracker's global scale and volume of projects are expected to mitigate some risks, contributing to a 10% stock increase this week.

Trade Policy Shifts and Market Beneficiaries

The Biden administration's imposition of tariffs on $18 billion worth of imports from China has introduced a significant shift in US-China trade dynamics. These tariffs cover a range of goods, including electric vehicles and solar cells, aiming to correct trade practices deemed harmful to global supply chains. Morgan Stanley analysts, led by Laura Sanchez, view this move as a potential accelerant for demand for domestically produced goods, identifying Ford, General Motors, and First Solar as key beneficiaries. First Solar, in particular, is seen as a significant winner, with its stock up nearly 9% in 2024. The tariffs are expected to influence the automotive industry, potentially slowing EV penetration and benefiting traditional internal combustion engine vehicles, a scenario favorable for Ford and GM, whose stocks have risen in 2024.

AI and Data Centers Fueling Power Demand

Goldman Sachs forecasts a significant increase in U.S. power demand by 2030, driven by the growth of artificial intelligence and data centers. This demand is expected to double from the current 3% to 8%, with 60% powered by natural gas and the remainder by renewables. In response, Goldman Sachs recommends buying call options in companies like Kinder Morgan, EQT, First Solar, Sempra, and Southern Company, which are poised to benefit from this surge. Notably, First Solar is highlighted for a potential 43.3% upside, underscoring the growth opportunities in energy stocks linked to the anticipated power demand increase.

Market Optimism Amid Earnings Surprises

The S&P 500 and the Dow Jones Industrial Average have experienced significant gains, supported by strong earnings reports. With nearly 80% of S&P 500 companies beating Wall Street forecasts, the Dow has recorded its best week of the year and its eighth consecutive winning session. This performance has fueled market optimism, despite concerns over inflation and potential shifts in Federal Reserve policy. However, Goldman Sachs warns of possible market volatility ahead, driven by higher inflation and a potentially more hawkish Fed stance.

Street Views

  • Dimple Gosai, Bank of America (Bullish on Nextracker):

    "Nextracker is 'firing on all cylinders' after reporting earnings that beat estimates for a fourth straight quarter with a growing backlog of orders... Nextracker’s management is building a track record of outperforming its targets which should support a multiple expansion."