The solar industry has experienced significant volatility over the past year due to macroeconomic factors like rising inflation and interest rates.

As the Federal Reserve works to cool inflation by raising interest rates, this has substantially increased the cost of capital for renewable energy projects which are more sensitive to interest rate changes.

However, recent data shows inflation may be slowing. This has soothed investors in capital-intensive solar stocks. Companies like First Solar (FSLR) saw their stock price rise as investors grew more optimistic that declining inflation could lead the Fed to cut interest rates.

Lower rates would reduce financing costs and boost demand for residential and commercial solar installations.

If inflation continues cooling, it could invite more rate cuts from the Fed and bring much-needed relief for solar companies.

Nextracker (NXT) is a leading provider of solar tracking solutions that have helped drive the rapid adoption of solar power worldwide.

Founded in 2007, the company pioneered the development of single-axis solar trackers that optimize the positioning of solar panels throughout the day to maximize energy generation.

Nextracker’s tracking technologies have been instrumental in making utility-scale solar farms more productive and cost-effective. 

Trackers can increase a solar project’s annual energy output by 20-30% compared to fixed-tilt mounting systems by enabling each panel to follow the sun’s movement across the sky.

This boost in performance makes solar energy more competitive with traditional fossil fuel sources on a cost-per-kilowatt-hour basis.

Beyond the energy gains from tracking, Nextracker’s modular, scalable designs also help lower overall project costs.

The company’s trackers can be quickly and easily installed across large sites, streamlining construction timelines. Once operational, the trackers require very little maintenance.

Nextracker’s proprietary software and control systems remotely monitor performance to identify and address any issues before they impact energy production.

These advantages have made Nextracker the clear market leader. As of 2024, the company has shipped over 100 GW of solar trackers to projects worldwide, representing more than 30% global market share. 

Major utility and renewable energy developer customers like AES, EDF Renewables, and BayWa r.e. continue to choose Nextracker for their growing portfolios of solar and hybrid solar-storage projects.

Beyond hardware, Nextracker is also expanding into value-added software and services. Its NEXTracker 5E cloud-based monitoring platform provides real-time operational insights to optimize maintenance and maximize uptime.

The company is also piloting new offerings like microgrid control systems that integrate solar, storage, and grid resources for off-grid and island communities. These solutions help expand Nextracker’s total addressable market beyond core solar tracker sales.

In the latest quarterly earnings report, Nextracker demonstrated the financial results of its leadership position and execution.

The company achieved 50% revenue and 109% EBITDA growth YoY with backlog increasing to $4 billion.

It also managed to achieve a 73% Uniform return on assets ”ROA” and 83% asset growth last year despite an unfavorable macro environment.

Looking ahead, trends point to continued strong demand growth for Nextracker’s products and services.

The global push for renewable energy shows no signs of slowing as countries work to reduce emissions and transition away from fossil fuels. Solar power in particular is expected to account for one-third of new global power capacity through 2030.

As the leader in an essential component of utility-scale solar farms, Nextracker appears well-positioned to capture significant opportunities within this expanding market.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research

Today’s highlight, Nextracker (NXT) is one of the top stock picks from FA Alpha 50 this month. To see more stock picks like this, become an FA Alpha get access to FA Alpha 50.