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.

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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.