Company Background and Competition
Founded in 2013 by Dan Shugar, NEXTracker provides advanced tracking technology to ensure solar farms can operate efficiently by capturing the sun's energy throughout the day. NEXTracker went public through an IPO in 2023, increasing efforts to advance solar energy capabilities.
The company has over 25 manufacturing locations within the U.S., with facilities in India, Europe, Australia, and Latin America. The business has seen serious revenue growth over the last three years with a CAGR of 30%.
From 2013 through 2023, NEXTracker has maintained industry leadership with a global market share of 23%, while its closest competitor, Array Technologies, has a market share of 16%. The comparison in FY24 is stark:
NEXTracker vs. Array Technologies — FY2024
| Metric | NEXTracker | Array Technologies |
|---|---|---|
| FY24 Revenue | $2.5B | $1.0B |
| Net Income / (Loss) | $496M | ($240M) |
| Debt-to-Equity | 15% | 574% |
| Times Interest Earned | 42x | N/A |
Global PV Tracker Market Share by Shipments, 2023
Revisiting the Inflation Reduction Act
Like First Solar, NEXTracker has benefited from the Inflation Reduction Act (IRA) and carries similar risks — sensitivity to changes in governmental policy and potential reduction in IRA tax credits. I have previously argued that any revision to the IRA is unlikely to cut tax benefits for the solar industry significantly, if at all.
Boom or Bottleneck? NEXTracker's $8B Backlog Challenge
Solar is a high-growth industry, and several companies have entered the space in which NEXTracker operates. This has led to increased competition. Although the company has successfully maintained its status as an industry leader, it must continue driving innovative technologies into the market and manage its growing backlog.
NEXTracker has a backlog of $4.5 billion, and management forecasts an 80% increase to $8 billion over the next eight quarters. Although backlogs provide insight into the future and signal robust growth, they also create risks:
- With high consumer demand, NEXTracker must be able to meet consumer demands quickly, ensuring customers are satisfied.
- Management must ensure production is efficient and costs are not rising; production disruption could threaten the company's ability to fulfill its backlogs.
To mitigate these risks, the company's management has continued expanding partnerships, material sourcing, and manufacturing facilities globally, tying facility location to demand.
Prepared for a Solar Boom: NEXTracker's Global Expansion
NEXTracker's strong leadership has been capitalizing on increased solar demand worldwide. Notable growth markets:
- India: Solar industry expected to experience a CAGR of 15% over the next 5 years. NEXTracker's India orders include raw materials that are locally sourced and used in entirely local manufacturing facilities.
- Canada: Expected CAGR of 23% over the next 5 years. NEXTracker is the dominant solar tracking technology supplier in Canada.
These are just a few examples of NEXTracker's significant operations and partnerships spanning five of the seven continents.
Acquisitions and Cost-Cutting: NEXTracker's Strategy for Continued Dominance
NEXTracker has maintained market dominance through significant R&D spending and strategic acquisitions. In 2024, NEXTracker acquired two companies:
- Ojjo — Developed specialized technology that makes installing steel pipe foundations more efficient, with less drilling required on hard, rocky terrain. Expects a cheaper, more efficient installation process.
- Solar Pile International — Developed specialized piling technology, including special steel beams that allow solar farms to be solidly built on weakened soil or terrain.
These acquisitions were pursued to cut costs, gain access to specialized technologies, and decrease limitations when building on unreliable terrain.
Cashing In on the Sun: Why I See NEXTracker at $70
With a strong global market presence and proprietary technology, NEXTracker stands to benefit significantly from increased solar energy demand. Due to the company's industry dominance, strong global positioning, and rapid growth, I am placing a $70 price target, signaling 40% upside from current levels of $50 per share.
NEXTracker — Valuation Summary
| Valuation Model | Implied Value |
|---|---|
| DCF (10% CAGR, 3% LTGR, 13.14% WACC) | $67/share |
| P/E Multiple (First Solar peer) | $66/share |
Both models converge around $66–$67/share, strongly supporting the $70 price target.
| WACC | ||||||
|---|---|---|---|---|---|---|
| $67 | 11.14% | 12.14% | 13.14% | 14.14% | 15.14% | |
| LTGR | 2.0% | $79 | $70 | $62 | $56 | $51 |
| 2.5% | $83 | $73 | $65 | $58 | $52 | |
| 3.0% | $88 | $76 | $67 | $60 | $54 | |
| 3.5% | $93 | $80 | $70 | $62 | $56 | |
| 4.0% | $98 | $84 | $74 | $65 | $58 | |
NEXTracker is well-positioned for the future with strong financials as the foundation. The business is experiencing significant demand, as revealed by rapidly increasing backlogs. To accommodate and continue market strength, the company has developed a strong global supply chain, backed by globalizing manufacturing facilities and partnerships with suppliers.
