Is Nextracker Stock a Buy Now?

Nextracker (NXT), a leading solar tracking systems provider, has seen its stock nearly triple since its February 2023 IPO, fueled by robust revenue and adjusted EBITDA growth (27% and 103% CAGR respectively, FY22-FY25) and its 26% market share. While holding a substantial $4.75 billion backlog, FY26 guidance projects revenue growth of 8-17% but near-flat adjusted EBITDA, attributed to acquisition costs, increased R&D in AI/robotics, and expansion into lower-margin markets, signaling a potential moderation in growth (analysts project 12% revenue, 8% adjusted EBITDA CAGR FY25-FY28). Despite this maturation, Nextracker's market dominance and a reasonable 12x next year's adjusted EBITDA valuation position it as a significant player within the expanding global solar sector.

Analysis

Nextracker (NXT) has demonstrated exceptional performance since its February 2023 IPO, with its stock price nearly tripling. This appreciation is backed by strong fundamentals, including a 27% compound annual growth rate (CAGR) in revenue from fiscal 2022 to 2025, reaching $2.96 billion. More impressively, adjusted EBITDA grew at a 103% CAGR over the same period, expanding margins from 6.3% to 26.2%. The company has solidified its position as the market leader with a 26% share in solar tracking systems. However, a significant inflection point appears imminent. Despite a robust backlog of $4.75 billion, forward guidance for fiscal 2026 projects a deceleration, with revenue growth slowing to 8-17% and adjusted EBITDA expected to be nearly flat, ranging from a 3% decline to 4% growth. This margin compression is attributed to a combination of strategic M&A, increased R&D in AI and robotics, higher input costs, and expansion into lower-margin overseas markets. While these are investments in its competitive moat, the consensus analyst forecast for a 12% revenue CAGR through fiscal 2028 lags the broader solar tracker market's projected 17.3% CAGR, suggesting a maturing business model. At 12 times next year's adjusted EBITDA, Nextracker trades at a significant premium to its shrinking competitor Array Technologies (5x), a valuation that reflects its market leadership but will be tested by the moderated growth outlook.

Key Decisions for Investors

• Investors should weigh Nextracker's dominant market position and substantial $4.75 billion backlog against the near-term headwinds of margin compression and decelerating growth outlined in its fiscal 2026 guidance.
• The valuation premium relative to peers like Array Technologies is contingent on successful execution; therefore, monitor the integration of recent acquisitions and the return on investment from AI and robotics R&D for signs of sustained competitive advantage.
• Given the shift from hyper-growth to a more moderate growth profile, positions should be evaluated based on investment horizon, as near-term stock performance may be muted by the flat EBITDA outlook, while long-term value depends on the success of current strategic investments.