Barclays says FTC managing headwinds well but "many unknowns" remain
Shares of FTC Solar (FTCI) are under pressure on Wednesday after the company reported worse than expected losses per share yesterday, but with quarterly revenue that topped estimates. The provider of advanced solar tracker systems said its results were impacted in part by increases in steel prices and freight. Following FTC Solar's first quarter results, Bank of America analyst Julien Dumoulin-Smith downgraded the stock to Neutral, citing a reduced near-term profitability forecast. On the flip side, Roth Capital analyst Philip Shen remains bullish on the stock, keeping a Buy rating on FTC Solar, citing its long-term growth outlook.
QUARTERLY RESULTS: On Tuesday, FTC Solar reported adjusted first quarter losses per share of (10c), with consensus at (6c). The company reported revenue of $65.71M for the quarter, which was better than the expected $64.10M. For the second quarter, FTC Solar expects revenue between $41M-$46M, reflecting project delays as customers evaluate the current market pricing dynamics.
REDUCED NEAR-TERM PROFITABILITY FORECAST: Today, Bank of America analyst Julien Dumoulin-Smith downgraded FTC Solar to Neutral from Buy with a price target of $11.50, down from $12, following the company's first quarter earnings report. Though the revenue forecast for the second quarter was lower than his estimate given that a large customer is electing to defer a project, he believes the current backlog level and trend still supports a "sharp revenue acceleration" forecast. However, he has reduced his near-term profitability estimates in-line with management's outlook through the end of the fiscal year, leading to the downgrade. Clarity on deflation line of site remains critical and reflection in backlog acceleration into 2022 will be key, Dumoulin-Smith added.
'MANY UNKNOWNS': Also commenting on the company's results, Barclays analyst Moses Sutton noted that "a lot seemed to hang on this first update" following Array Technologies' (ARRY) "shockwave," as investors determine if FTC is as, less, or more impacted by steel and related dynamics. The analyst believes management did a good job navigating the tight-rope on where things could settle, but ultimately most of Array issues reverberated in FTC's update. Sutton argued that FTC seems to be managing headwinds well, but uncertain industry tracker economics and idiosyncratic execution risk leave him on the sidelines. The analyst has an Equal Weight rating and a price target of $11 on FTC's shares.
STEEL IMPACT ALREADY PRICED IN: Still bullish on the name, Roth Capital analyst Philip Shen maintained a Buy rating and a price target of $15 on FTC Solar, citing his view on its long-term growth outlook. The analyst acknowledged that FTC delivered a mixed first quarter and weak second quarter and second half of 2021 outlook. However, he believes that much of this was priced in with the stock down about 25% over the past month from the recent dramatic rise in input costs. Notably, the company does not take on steel risk and may be more directly impacted by freight, Shen contended.
PRICE ACTION: In Wednesday afternoon trading, shares of FTC Solar have dropped over 2% to $10.89.