Nextracker: Is Now the Time to Take Profits?

The solar sector, once a high-growth frontier, is maturing as global adoption accelerates and policy frameworks stabilize. For investors in Nextracker (NASDAQ: NXT), the question looms: Is the company’s current valuation a compelling entry point, or does it signal a peak in a sector primed for consolidation?

Financial Performance: A Model of Discipline

Nextracker’s fiscal year 2025 results underscore its operational prowess. Revenue surged to $3 billion, a 18% year-over-year increase, while adjusted EBITDA hit $776 million—a 49% jump—with a 26% margin [1]. Q2 2025 performance was equally robust, with $864.3 million in revenue and a 24.9% EBITDA margin [3]. These figures reflect disciplined cost management and the benefits of strategic acquisitions, such as Bentek’s robotics capabilities, which streamlined manufacturing [1].

The company’s backlog of $4.75 billion at Q2’s end, with 87% expected to convert within two years, provides a clear revenue runway [3]. Meanwhile, the inclusion of U.S. Inflation Reduction Act (IRA) 45X tax credits in gross margins (35.5% in Q3 2025) highlights its ability to monetize policy tailwinds [4].

Valuation Realism: Attractive or Overdue for a Correction?

Nextracker’s forward P/E ratio of 17.5x [6] appears compelling against peers like Array Technologies (46.30x P/E) [3] and the solar industry’s implied premium (ReNew Energy Global trades at 44.46x) [1]. Analysts have labeled it a “Moderate Buy,” with a consensus price target of $65.00—just 5.6% below its current price of $68.85 [1]. This suggests skepticism about near-term multiple expansion despite strong fundamentals.

However, the company’s valuation must be contextualized within a maturing sector. The global photovoltaics market, valued at $613.57 billion in 2025, is projected to grow at 9.6% CAGR through 2030 [4]. Yet, U.S. solar faces headwinds: residential installations fell 13% year-over-year due to high interest rates, while trade policies (e.g., anti-dumping duties on Southeast Asian modules) threaten supply chains [5]. Nextracker’s focus on utility-scale solar—accounting for 69% of U.S. new capacity in Q1 2025 [5]—positions it better than peers reliant on volatile residential demand.

Long-Term Growth: Policy-Driven Tailwinds and Execution Risks

The IRA’s 67% boost to long-term solar deployment projections [1] and Nextracker’s R&D investments in technologies like Hail Pro and XTR trackers [4] suggest durable growth. Its 2026 guidance ($3.2–$3.4 billion revenue) implies 6–13% growth—a slowdown from FY2025 but in line with sector maturation.

Yet, execution risks persist. While Nextracker’s EBITDA margins (24.9% in Q1 2026) [1] outperform peers, margin compression could occur as competition intensifies and project margins normalize. Additionally, the company’s reliance on U.S. tax credits exposes it to policy shifts—a risk mitigated but not eliminated by its $4.5 billion backlog [3].

Is Now the Time to Take Profits?

For income-focused investors, Nextracker’s 17.71% profit margin and $622 million in 2025 free cash flow [1] offer appeal. However, its P/E ratio of 13.57 [1] and “Moderate Buy” rating [2] suggest the market already prices in much of its near-term potential. Long-term bulls should note that renewables are on track to become the world’s top electricity source by 2030 [1], a trend Nextracker is well-positioned to capitalize on.

Conclusion: Nextracker’s valuation appears realistic, balancing strong margins and growth with sector-specific risks. While taking partial profits may hedge against near-term volatility, the company’s strategic positioning in utility-scale solar and IRA-driven demand makes a full exit premature. Investors with a 3–5 year horizon could benefit from holding, provided they monitor trade policy and margin trends.

Source:
[1] Nextracker Q4 FY2025 slides: Record revenue and 49% EBITDA growth [https://www.investing.com/news/company-news/nextracker-q4-fy2025-slides-record-revenue-and-49-ebitda-growth-acquires-bentek-93CH-4115457]
[2] Nextracker Inc. (NXT) Analyst Ratings, Estimates & Forecasts [https://finance.yahoo.com/quote/NXT/analysis/]
[3] Array Technologies (ARRY) Competitors [https://www.marketbeat.com/stocks/NASDAQ/ARRY/competitors-and-alternatives/]
[4] Nextracker Reports Q3 FY25 Financial Results [https://investors.nextracker.com/news/news-details/2025/Nextracker-Reports-Q3-FY25-Financial-Results/]
[5] Solar Market Insight Report Q2 2025 – SEIA [https://seia.org/research-resources/solar-market-insight-report-q2-2025/]
[6] Nextracker (NXT) Research Report [https://stockstory.org/us/stocks/nasdaq/nxt]