FTC Solar, a maker of solar tracking systems, got a vote of confidence from UBS on Tuesday. The investment bank upgraded the stock, arguing that the company's product overhaul is finally starting to pay off with new orders in the US and Australia. UBS also pointed to the first shipments for the Fraser Coast project as evidence that customers are embracing the new hardware.
Solar trackers are the metal frames and motors that tilt solar panels to follow the sun across the sky. They're a key component of large, utility-scale solar farms, where even small gains in efficiency can translate into significant financial returns. FTC Solar's trackers are designed to maximize energy capture, but the company has struggled in recent years amid intense competition and a slowdown in project development.
What's driving the turnaround?
According to UBS, FTC Solar's refreshed product lineup is the main catalyst. The company has introduced a new single-axis tracker (the "1P" model) and a version specifically engineered to work with panels made by First Solar. These products are aimed at addressing customer concerns about reliability and performance, which had previously held back adoption.
The bank highlighted fresh orders in the US and Australia, as well as the initial shipments for the Fraser Coast project, as concrete signs that the strategy is working. Fraser Coast, a large solar project in Queensland, Australia, is seen as a key test for FTC Solar's ability to execute on international contracts.
UBS also expects the company to reach positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) by 2028. Adjusted EBITDA is a common profitability measure that strips out one-off costs and non-cash charges. Reaching that milestone would mark a major shift for a company that has been burning cash.
Why the stock still looks cheap
Despite the improving outlook, UBS argues that the market hasn't fully priced in the potential earnings power. The stock price, the bank says, still bakes in too little of the profit that FTC Solar could generate by 2028. That disconnect is what makes the upgrade compelling for investors.
For everyday investors, the key takeaway is that this is a bet on a turnaround story. FTC Solar is a smaller player in a market dominated by giants like Nextracker and Array Technologies. Its success depends on winning over customers with better technology and reliable delivery, especially as the solar industry faces headwinds from high interest rates and supply chain disruptions.
It's also worth noting that the broader solar sector has been volatile. SolarEdge, another solar equipment maker, has set ambitious revenue targets, but the sector as a whole has seen its share of ups and downs. Investors should be prepared for similar volatility with FTC Solar.
What it means for investors
UBS's upgrade is a positive signal, but it's not a guarantee. Turnarounds can take longer than expected, and the company still faces execution risks. The 2028 timeline for profitability is several years away, and any delays in project rollouts or order cancellations could derail the plan.
For those considering an investment, it's important to weigh the potential upside against the risks. The stock is likely to remain sensitive to news about new contracts and project milestones. Broader market conditions, such as oil price swings, can also affect sentiment toward renewable energy stocks.
UBS's confidence is based on visible progress, but the market will be watching closely to see if FTC Solar can convert its order pipeline into sustained revenue growth. Similar turnaround stories in other industries have shown that patience is often required.
In the meantime, investors should keep an eye on the company's quarterly earnings reports for updates on order flow and cash burn. Consumer confidence and economic conditions can also influence the pace of solar project financing.
Ultimately, UBS's upgrade is a reminder that sometimes the market is slow to recognize a company's improving fundamentals. But it's also a reminder that such opportunities come with real risk. As always, do your own research and consider how this fits into your broader portfolio.
