Shoals: Appointed New CEO, Announced Commercial Agreement; Maintaining $20 Fair Value Estimate

We maintain our $20 fair value estimate for no-moat Shoals SHLS after it announced the appointment of a new CEO as well as a large commercial agreement. We view shares as overvalued.

On June 14, Shoals appointed Brandon Moss as its permanent CEO, replacing Jeff Tolnar, who served as interim CEO since early this year following Jason Whitaker’s resignation due to health reasons. Moss joins the firm from Southwire Company, an $8 billion revenue company and one of North America’s largest wire and cable manufacturers. He most recently served as president of the tools, components, & assembled solutions group. Tolnar will remain with Shoals as president, which we view as a positive given his expertise in the EV charging segment that Shoals is attempting to penetrate.

In addition, on June 12, Shoals announced the signing of a Master Supply Agreement with Blattner Company to deliver 10 gigawatts of Shoals’ Big Lead Assembly solution over the next two years. While we view such an agreement with a leading wind and solar engineering, procurement, and construction firm such as Blattner as a positive, it’s unclear if this volume is incremental to Shoals’ prior expectations. We leave our current financial expectations unchanged as we await further details on the agreement.

Shoals possesses one of the highest-margin profiles within our solar coverage. We see its margin profile as intact over the near and medium terms but lack confidence such margins will be maintained over the long term given our no-moat rating.