Equities

BoA Sees 39% Upside in Nextracker, Eyes $64 Target

BoA highlights Nextracker with a 39% upside, amidst trade policy shifts and a predicted surge in US power demand.

By Bill Bullington

5/16, 19:38 EDT
EQT Corporation
Ford Motor Company
First Solar, Inc.
General Motors Company
Kinder Morgan, Inc.
Southern Company
DBA Sempra
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Key Takeaway

  • BoA upgrades Nextracker to $64, citing a 39% upside due to its $4 billion order backlog and quarterly revenue surpassing estimates.
  • Biden's tariffs on China could boost Ford, GM, and First Solar; First Solar's stock rose nearly 9% in response.
  • Goldman Sachs sees U.S. power demand doubling by 2030, recommends buying call options in Kinder Morgan, EQT, First Solar, Sempra, Southern Company.

Nextracker's Strong Performance

Nextracker, a company specializing in solar tracking devices, has been highlighted by Bank of America (BoA) for its impressive earnings momentum, having surpassed estimates for the fourth consecutive quarter. Analyst Dimple Gosai from BoA has upgraded the stock price target to $64 from $60, suggesting a 39% upside from its current position. This optimism is rooted in Nextracker's substantial order backlog, reported at $4 billion for the fiscal year 2024, and its quarterly revenue of $737 million, which exceeded BoA's expectations of $676 million. Gosai's confidence in Nextracker is further bolstered by the company's ability to outperform its targets, which could lead to a valuation expansion. Despite facing competitive market pressures, Nextracker's global scale and volume of projects are seen as key factors that will help absorb some of these risks, contributing to the stock's 10% increase this week.

Trade Policy Impacts

The recent imposition of tariffs by the Biden administration on $18 billion worth of imports from China, covering a wide range of goods including electric vehicles and solar cells, marks a significant shift in US-China trade dynamics. Analysts from Morgan Stanley, led by Laura Sanchez, believe this move could accelerate demand for domestically produced goods. Companies like Ford, General Motors, and First Solar are identified as potential beneficiaries of these tariffs. First Solar, in particular, has seen its stock rise nearly 9% in 2024, benefiting from the increased demand for domestic solar products. The tariffs are expected to have a broader impact on the automotive industry, potentially slowing the penetration of electric vehicles and favoring traditional internal combustion engine vehicles, which could benefit Ford and GM.

Rising Power Demand and Investment Opportunities

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

Street Views

  • BofA Securities Analysts (Bullish on AIA Group):

    "All 30 analysts covering the stock are bullish and give it either a buy or overweight rating at a target price of 89.72 Hong Kong dollars ($11.50). This gives the stock upside potential of 42.0%."

  • BofA Securities Analysts (Bullish on Samsung Electronics):

    "Of the 41 analysts covering Samsung Electronics, 36 have an overweight or buy call. Analysts’ target price on the stock is 103,211 Korean won ($76.61), or 32.0% potential upside."

  • BofA Securities Analysts (Bullish on SK Hynix):

    "And 35 of 39 analysts covering SK Hynix have a buy or overweight rating on the stock. Their average target price is 233,378 Korean won, implying nearly 20.9% upside potential."