Why UBS Still Sees Long-Term Upside in Shoals (SHLS) Despite Margin Pressure

Shoals Technologies Group, Inc. (NASDAQ:SHLS) is one of the 10 Best Renewable Energy Stocks to Buy Now. On February 25, 2026, UBS lowered its price target on Shoals Technologies Group to $11 from $12 while maintaining a Buy rating. According to the firm’s note, fourth-quarter results reflected significant headwinds to Shoals’ gross margin profile from shifting product mix, rising input costs, and increasing competition. UBS also said there is potential for significant longer-term upside in the company’s Battery Energy Storage Solutions segment as demand from data center customers rises.

For context, Shoals reported fourth-quarter 2025 revenue of $148.3 million, up 39% year over year, driven by higher sales volumes tied to demand for utility-scale solar projects. Gross profit rose to $46.9 million from $40.2 million, but gross margin fell to 31.6% from 37.6%. The company said the margin decline was caused by higher material costs and $3.3 million in duties and tariffs that were not incurred in the prior-year quarter. Adjusted EBITDA increased to $30.3 million from $26.4 million, while adjusted diluted EPS rose to $0.10 from $0.08.

For full-year 2025, revenue increased 19% to $475.3 million, while backlog and awarded orders reached a record $747.6 million. Shoals said the backlog increase reflected continued demand for its solar products, including growth in new domestic and international markets. For 2026, the company guided for revenue of $560 million to $600 million and adjusted EBITDA of $110 million to $130 million. It also issued first-quarter guidance, citing headwinds in the utility-scale solar market that changed some customer order patterns.

Shoals Technologies Group, Inc. (NASDAQ:SHLS) provides electrical balance-of-system solutions for solar energy, battery energy storage, and related energy infrastructure applications.

While we acknowledge the potential of SHLS to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than SHLS and that has 100x upside potential, check out our report about this cheapest AI stock.

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