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Investing.com -- Nextracker (NASDAQ:NXT) stock rose 5% Monday morning after Guggenheim upgraded the solar tracking system manufacturer from Neutral to Buy with a price target of $74, representing a potential 22% upside from Friday’s closing price of $60.58.
The upgrade comes after the IRS released updated safe-harbor rules that Guggenheim analyst Joseph Osha believes will significantly benefit tracker companies like Nextracker. The new rules specifically mention racking installation as activity that meets the physical work test for tax credit qualification.
"We believe that Friday’s safe-harbor clarifications from the IRS were good news for tracker suppliers like NXT," Osha noted in his report.
The IRS guidelines allow for "off-site work of a significant nature" to qualify projects for tax credits as long as the work is tied to a specific project. This provision specifically includes mounting equipment, support structures, and other power conditioning equipment - core products in Nextracker’s business.
Guggenheim highlighted that tracker companies with established domestic supply chains are well-positioned to benefit as developers work to stay within Foreign Entity of Concern (FEOC) limits, with additional clarity on FEOC implementation potentially coming as early as this week.
Despite Nextracker’s stock increasing 50% over the past year compared to the S&P 500’s 15% gain, Guggenheim views the current valuation as attractive at 10.2x calendar 2025 EBITDA estimates and 9.6x 2026 EBITDA estimates. The firm established a target multiple of 12x 2026 EBITDA to support its $74 price target.