We came across a bullish thesis on FTC Solar, Inc. (FTCI) on Value Degen’s Substack by Unemployed Value Degen and Jake LaMotta. In this article we will summarize the bulls’ thesis on FTCI. FTC Solar, Inc. (FTCI) share was trading at $0.4940 as of Sept 18th.
A construction crew working on a solar energy system, revealing the company’s drive for success.
FTC Solar (FTCI) represents a unique opportunity in the beleaguered solar sector, offering both high risk and high reward. As a company specializing in solar tracker systems, software, and engineering, FTCI provides hardware that allows solar panels to track the sun, selling its services to solar developers. Although the solar sector has been crushed by rising interest rates and market pessimism, there is reason to believe that FTCI may be primed for a turnaround, particularly as interest rate cuts could stimulate the industry and state governments remain committed to renewable energy.
However, FTCI is not without challenges. Once a leader in the single-axis tracker market, the company has seen revenue decline significantly, from $270 million in 2021 to $77 million over the last twelve months, as the industry has shifted toward dual-axis trackers. This has forced FTCI to start from scratch in penetrating this new market. With a $70 million market capitalization, FTCI may seem small, but its $505 million contracted backlog and additional $1.3 billion non-contracted pipeline suggest a far larger business. The key to this turnaround lies in the company’s ability to execute on this backlog, while overcoming delays in several major projects that are now expected to start in Q4 2024.
A new CEO, Yann Brandt, could play a pivotal role in this transformation. Brandt, a well-known figure in the solar industry with a track record of preparing companies for sale, has the connections and expertise to guide FTCI through its next phase. While FTCI’s financials remain precarious, with minimal cash reserves and a need to reach breakeven, Brandt’s leadership could unlock significant value. FTCI’s insider buying, particularly by co-founder Ahmad Chatila, signals confidence from those closest to the company.
For investors, FTCI offers immense upside potential. With a market cap of $70 million, a successful execution of its backlog could result in revenues approaching $500 million, and a potential sale at 2x sales could yield a tenfold return. Yet, given its weak balance sheet and the high-risk nature of the solar industry, investors should approach with caution, sizing their position carefully. Nonetheless, for those willing to stomach the volatility, FTCI might be one of the highest-torque plays in the renewable energy space, with a 10x return potential within two to three years.
FTC Solar, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 9 hedge fund portfolios held FTCI at the end of the second quarter which was 10 in the previous quarter. While we acknowledge the risk and potential of FTCI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FTCI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.