What started as a good week for the bulls was quickly vanquished by renewed U.S./China trade fears last week. How long these worries will again weigh on the market is anyone’s guess. However, Friday’s ugly selloff was enough to send the S&P 500 lower by 2.4% on the week, while the Dow fell 2.7%, and the Nasdaq lost 2.5%. Monday’s encouraging bounce-back erased some of those gains, however. We’ll see where it goes from here.
The Stock – Nextracker (NXT)
Solar stocks have a solid underlying, long-term growth outlook, but there always seem to be a lot of moving parts, often involving government policy (subsidies, tariffs, etc.) both here and overseas. However, after months of uncertainty, those factors have come in better than expected (the big tax and spending bill passed this summer phased out some solar subsidies, but the extent of those and the timing were much slower than feared), which is one reason Nextracker is picking up steam.
The company is the #1 provider of solar trackers worldwide (it has the top position in the U.S., Latin America and Europe and it continues to take share), which move solar panels gradually through the day to maximize the amount of solar energy they collect; while it does add cost to a project, it’s worth it for big solar farms, and core trackers as well as recent product releases (like those that reduce severe weather risk) are selling well.
That said, there’s more to the story, as Nextracker has a very solid balance sheet ($740 million cash, no debt) that’s allowing it to do some M&A in an effort to broaden its platform—the company bought an outfit called Bentek earlier this year ($78 million cash) to push into the eBOS market (eBOS is basically a collection of electrical components that are needed to interconnect everything in a solar plant), while prior acquisitions should help with solar project site development (producing maps from AI-enabled drone imagery), provide robotic cleaners for solar cells at large sites and autonomous inspection and fire protection robots for solar plants. Nextracker thinks non-tracker revenue can total $1.4 billion by 2030 (and make up one-third of business), while the core tracker business lifts mid-single digit and free cash flow remains strong. More details will come on October 23 (earnings report) and November 14 (Analyst Day).
Technical Analysis
NXT topped early last year and, after a good-sized decline, essentially bottomed out for many months into the April low. Shares saw some buying on earnings in May and then were news-driven for a few months as the big tax and spending bill worked its way through Congress. Mid-August saw a character change, with strong buying leading to the upside run of the past few weeks. Stop – 70.5
The Covered Call Trade
Buy Nextracker (NXT) Stock at 84, Sell to Open November 80 Strike Calls (exp. 11/21) for $9, or a Net Price of 75 or less
Static Return: $500 per covered call (6.66%)
Breakeven: 75
Covered Call Return (if assigned): $500 per covered call (6.66%)
Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.
However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the approximate Net Price, or 75 or less. (In this case, 84 minus 9 = 75. Or another example is you could pay 84.5 for the stock and sell the call for 9.50, which also equals 75.)
For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …
Open Positions
| Stock Name and Symbol | Price Bought | Current Stock Price | Stop | Option - Price of Call Sold | Current Option Price |
| PureStorage (PSTG) | 77.85 | 90 | 64 | October 75 -- $5.90 | $15.00 |
| Kratos Defense (KTOS) | 63 | 91 | 57 | October 62.5 -- $4.90 | $28.50 |
| Cameco (CCJ) | 81.5 | 88 | 74 | October 80 - $5.45 | $8.00 |
| Coupang (CPNG) | 32.45 | 31.5 | 29 | October 32 -- $1.20 | $0.20 |
| Lyft (LYFT) | 22.3 | 20 | 18.1 | October 23 -- $0.75 | $0.10 |
| Century Aluminum (CENX) | 30.65 | 31.65 | 24 | November 31 -- $3 | $3.00 |
The next Cabot Profit Booster issue will be published on October 21, 2025.
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