In the solar energy market, Shoal technologies (NASDAQ: SHLS) has an interesting niche. The company provides cabling and components for solar energy systems. This technology was widely commoditized, but Shoals was able to take advantage of its components by providing systems that were much cheaper to install. Jason Hall, Motley Fool contributor, explains why he is optimistic for this company in this episode of “The 5” recorded on October 11.
Jason Hall: One company that I recently started to learn more about is called Shoals Technologies. Shoals Technologies is doing something really weird. They make commodities in the United States and they sell it for a higher price than most of their competition, and their customers love to buy it for them. Shoals achieves the electrical balance of system solutions, primarily cabling and components for the large scale solar system. Basically it is all the wires, connectors and components. When a large scale solar system goes down, they have to wire all the panels and they have to get all the direct current, run it through the inverters, and then connect it to the grid, it is mainly a matter of business. of commodities, but these guys figured out how to customize and build systems that cost more for components, but those components make up a very small percentage of the total spend.
The reason their customers pay more is that they drastically reduce labor costs. When you deploy these systems, you often have to hire licensed electricians to do so using the systems that most of their competitors offer. But with the Shoals Technologies system with their main products, much of this can be done through regular work, you don’t need to have a licensed electrician to do it. This means substantial cost savings.
The company also has a long history of highly reliable products. Ultimately, these are lucrative endeavors. If these large-scale systems cannot supply electricity to the grid, whoever paid for this solar system is not making money because they are selling that electricity. This is a really important part of the solution. This is something they have found, by doing it the right way their customers are willing to pay more. It’s a really interesting approach that Shoals took.
This article represents the opinion of the author, who may disagree with the “official†recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.