On Wednesday, BMO Capital adjusted its outlook on Nextracker Inc (NASDAQ:NXT) shares, reducing the firm's price target on the stock from $62.00 to $56.00, while keeping a Market Perform rating.
The move comes as Nextracker, known for its execution capabilities and typically conservative guidance, introduced its financial outlook for fiscal year 2025.
The company's revenue guidance for FY 2025 is set at $2.8 to $2.9 billion, aligning with expectations. This forecast is notably supported by a year-end backlog of at least $4 billion, which suggests strong bookings of approximately $1.2 billion.
Despite this, the inclusion of a 45x Production Tax Credit ( PTC (NASDAQ:PTC)) in the FY 2025 guidance for the first time has led to an adjusted EBITDA/EPS that, when normalized, indicates a year-over-year decline due to lower implied gross margins.
BMO Capital's commentary highlights Nextracker's solid track record and the strength of its year-end backlog. However, the firm points out that the financial guidance, when accounting for the PTC and normalized for comparison, suggests a potential decrease in profitability on a year-over-year basis.
As a result, the analyst maintains the Market Perform rating but sees the need to lower the target price to $56 per share.
The revised price target reflects the analyst's view of the company's financial prospects, taking into account both the robust bookings and the implications of the new guidance on future earnings.
Nextracker's stock performance will continue to be monitored as the market digests the updated fiscal projections and the potential impacts on the company's financial health in the coming years.
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