This story originally appeared in The Technology Letter and is republished here with permission.

First EV decline since 2020?

The past few days have seen a passel of negative data points regarding Tesla as the electric vehicle market continues to struggle through what some are calling an “EV winter.” Deutsche Bank analyst Emmanuel Rosser on Thursday was the latest analyst cutting his estimate for Tesla’s deliveries. He now sees merely “mid-single digit” percentage growth this year, perhaps 1.9 million units, below the two million or so the Street has been expecting.

And then there’s this bit of bad news: Canaccord Genuity’s George Gianarikas, a bull on Tesla stock, notes some dispiriting data Thursday from Cox Automotive, the privately held company that serves car dealers with tools such as e-commerce software. In their presentation on Q1 data trends, which you can download from Cox’s Web site, the Cox analysts indicate that U.S. sales of EVs in the first quarter probably declined from the fourth quarter’s level, 145,000 units versus 162,000 units. That would be the first quarter-over-quarter decline in electric vehicle sales since the first quarter of 2020. To that data point, Gianarikas adds that he expects Tesla may have seen its slowest year-over-year growth in years in the first quarter, just 3.2%. Tesla shares are down 29% since the start of the year.

Nextracker’s big windfall

Speaking of renewables, Daiwa Capital’s Jonathan Kees on Thursday initiated coverage of Nextracker, the prominent renewable energy technology supplier selling “tilt trackers” that get the most energy out of a rooftop solar facility, with an Outperform rating, and a $63 target price, just 13% above Thursday’s close of $56.27. Because of the company’s focus on “utility-scale” solar, serving industrial use cases, writes Kees, “NXT has been outgrowing the solar industry, and we believe it can continue doing so.” The company’s big windfall is the U.S. Treasury Department’s “Inflation Reduction Act,” or, IRA, which is giving the company tens of millions in tax credits that can cover cost of doing business. The company “has guided $50-80M in IRA 45X production tax credit to cost of sales for F4Q24 and far greater amounts for F25.” But in addition, “For the other IRA credits, NXT can potentially capture hundreds of millions more of EBITDA upside by splitting these credits with its suppliers/customers.”

However, timing of those additional credits hasn’t yet been announced, notes Kees. Beyond that windfall, Kees notes that solar is not only beneficial environmentally, but far more economical. “The levelized cost of electricity production (LCOE), the cost to build an electricity plant and produce electricity, is far more economical to build and run over the long run with renewables than fossil fuels such as coal and natural gas.” Note, a second Trump administration could spell trouble for Nextracker along with all renewables, writes Kees. Nextracker is one of the TL20 stocks worth considering, having been added on the February 5th rebalancing. The stock is flat since then, and up 20% this year.

Palantir’s AI boost is overdone

Shares of shadowy software maker Palantir, which serves the intelligence and military communities, in addition to enterprise, are among the most expensive of all software stocks, and way overpriced, according to Monness Crespi Hardt’s Brian White. White on Thursday cut his rating on the stock to Sell from Neutral, writing that the “AI hype cycle” has given the stock “what we view as an egregiously rich valuation.” At a recent price of $24 and change, after almost tripling in price in the past year, writes White, the stock is trading for 17 times projected revenue. That is higher than comparable software names Datadog and MongoDB, at 11 times sales and 10 times, respectively. And both those companies have higher projected revenue growth than Palantir, 30% and 28%, versus Palantir’s expected 20% growth.

“Moreover, the number of shares outstanding is excessive, and we believe it will take years for Palantir to grow into its current valuation,” writes White, with Palantir having some of the lowest revenue per share of any of his covered companies. As for the AI hype, White does believe that Palantir can ultimately benefit, but, it won’t be this year. “Our enterprise software coverage generates de minimus revenue from generative AI today, and we doubt this will change in 2024,” he writes, while, “we believe enterprises will be thoughtful in adopting generative AI, and there is no shortage of next-gen AI solutions available in the market.” Palantir shares fell roughly 6% on White’s downgrade.

Fiber-optic confab is a little bit of a letdown

Analysts who cover fiber-optics trudged to the annual Optical Fiber Communications conference this week, the industry’s big trade show, taking place in San Diego. They found it to be a mixed affair: some hopeful spots for a beleaguered industry, but also management commentary that dampened spirits. The stocks of fiber-optic providers Lumentum and Ciena and others have been weak this year, as the industry has been crawling out from under a pile of inventories of equipment that had built up. On the plus side, relates Rosenblatt analyst Mike Genovese, the fastest speeds of fiber-optic equipment, 800 billion bytes per second, known as “800G,” and 1.6 trillion bytes per second, “1.6T,” are both seen as benefitting from demand for greater throughput for AI.

“However, high investor participation brings high expectations” writes Genovese of the increased attendance at the show this year. “We found the event to be somewhat disappointing in terms of timing of when all the 800+G revenue and profit goodness gets here, especially since the Cloud Titans can be cautious when transitioning new technology to live traffic networks,” he writes. Both Lumentum and Coherent, two laser makers heavily invested in 800G, tempered expectations for shipments this year, he notes, “a downtick from prior expectations.” His four positive meetings, writes Genovese, were with Infinera, Applied Optoelectronics, Viavi Solutions, and Credo, all four of which seemed to indicate improving trends in their businesses. Of those, Infinera is the only stock that’s beaten the market since the start of the year, up 26%.

Rumors of Monolithic Power’s decline are exaggerated

Shares of chipmaker Monolithic Power Systems, which makes sophisticated circuitry to regulate the power in computer systems, have been on a downward slope since hitting an all-time high in mid-February. The proximate cause may be some rumors that have been floating around that the company’s chips were dumped by customer Nvidia, which uses the circuits to regulate power in its GPUs, because of some malfunctions. But those rumors are exaggerated, writes Rosenblatt’s Hans Mosesmann, one of the most bullish analysts on Monolithic. In a note Thursday, Mosesmann raises his price target on Monolithic to $800 from $750, which would be 19% above a recent $673.44. Mosesmann was at Nvidia’s GTC conference last week. There, he learned that “contrary to the bearish narrative in the past month that the green team disfavored MPS, we believe the opposite is happening.”

Mosesmann learned that the new Nvidia GPU chip, “BlackWell,” needs to have a special kind of power-management that’s “vertical” rather than horizontal, and that “only Monolithic Power can do this at the moment,” giving the company a kind of exclusive on that new Nvidia part. He also sees the company benefitting from AMD’s competing GPU chip, “MI300,” which also will need Monolithic’s power expertise. Both opportunities hold the prospect for boosting the average selling price of Monolithic’s circuits.

This story originally appeared in The Technology Letter and is republished here with permission.