Shoals Tech (SHLS) with its first notable trade since coming public as 1000 October $30 calls bought to open at $3.30 in a single lot with shares basically flat since its IPO. SHLS dipped as low at $21 in May and since has put in a higher lower at $25 and now working on holding VWAP off the May lows near $29.15 this past week, Shares are also trading just under VWAP from its highs and IPO day so a move above $35.30 can free up a strong move higher.

Shoals is a leading provider of electrical balance of system or “EBOS” solutions for solar energy projects. EBOS encompasses all of the components that are necessary to carry the electric current produced by solar panels to an inverter and ultimately to the power grid. EBOS components that SHLS produces include cable assemblies, inline fuses, combiners, disconnects, recombiners, wireless monitoring systems, junction boxes, transition enclosures and splice boxes. SHLS generates most of its revenues from full system solutions which integrate design and engineering support, proprietary components and innovative installation methods into a single offering that would otherwise be challenging for a customer to obtain from a single provider or at all. SHLS was the first company to successfully commercialize “plug-n-play” EBOS systems that use simple push connectors rather than the wire “crimps” used in conventional systems which allows for general labor installation rather than electricians. SHLD mainly sells to engineering, procurement and construction firms that build solar energy projects. Demand for EBOS is driven primarily by installations of new ground-mounted solar energy projects. The share of solar energy projects that include battery energy storage will increase from 6% of capacity installed in 2019 to 22% of capacity installed in 2023 according to Wood Mackenzie.

SHLS currently has a market cap of $5.2B and trades at a premium valuation of 45.5X FY22 EBITDA and 16X EV/Sales. SHLS revenues are seen rising 35.9% in 2021 and 50.5% in 2022 with EBITDA climbing 27.7% and 60.7% respectively. SHLS has solid financials with industry leading Adjusted EBITDA margins above 30% and strong FCF generation. SHLS is also expanding into the EV Charging market with a potential $2.7B annual opportunity as EV charging solutions can be a significant business for its solutions. SHLS already has a dominant moat in its solar category at more than a 50% market share. SHLS also has a lot of potential to expand internationally where the TAM is 4X that of the US. The core BLA product has gone from 7% market share to 32% in three years as measured by MW installed, and seen growing to 55%-60% by 2023. Notably, SHLS’s backlog and awarded orders have grown considerably.

SHLS shares remain at a premium valuation but it appears justified. The company has strong financials with rapid growth while having a ton of upside growth potential in EV Charging, Battery Storage and International Expansion. It appears to be a core own across the Alternative Energy complex.