SEI Forensic Analysis

PART 1: TRADING EXECUTION

Trading Setup & Entry Strategy

Conviction: HIGH (8.5/10) Thesis: SEI has successfully executed a "valuation re-rating" pivot from a cyclical oilfield services (OFS) company to a secular growth AI/Data Center infrastructure play. The market is aggressively repricing the multiple. Do not short this momentum.

Strategy: BUY ON CONSOLIDATION (Trend Following)

• •Entry Zone 1 (Aggressive): $54.00 - $54.50 (Current levels/Intraday VWAP). Initiate 30% starter position here to capture immediate momentum.
• •Entry Zone 2 (Technical Support): $52.80 - $53.25 (Near 10-Day SMA). Add 40% of position. This creates a blended entry around $53.50.
• •Entry Zone 3 (Pullback/Flush): $49.00 - $50.00 (Near 50-Day SMA). Add final 30% only if broad market weakness drags SEI down. This is the "value" zone.

Risk Management:

• •Hard Stop: $46.80 (Close below recent swing lows and breach of 50-Day SMA). Thesis violation point.
• •Target 1: $62.00 (Short-term extension).
• •Target 2: $70.00 (Analyst target alignment/Psychological resistance).
• •Timeframe: 2-8 Weeks (Swing to Position Trade).

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Executive Summary

Analysis Date: 2026-01-21 Current Price: $54.96

Solaris Energy Infrastructure (SEI) presents a classic asymmetric growth setup. The company has fundamentally altered its DNA, shifting revenue mix from 90%+ logistics (low margin/cyclical) to 63% Power Solutions (high margin/secular growth). Q3 revenue exploded 122% YoY, and the company raised $747M in ultra-cheap debt (0.25% coupon) to fund massive CAPEX for data center power generation. While a shareholder lawsuit exists, price action confirms the market is looking past it. Technicals show a strong uptrend with RSI at 60 (bullish, not exhausted).

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PART 2: DETAILED RESEARCH

Recent Material Events (8-K Analysis)

• •Oct 2025 (Financing): Issued $747.5M of 0.25% Convertible Senior Notes due 2031. Critical Insight: Raising capital at 0.25% is incredibly advantageous. Proceeds were used to pay off higher-interest term loans. This significantly lowers cost of capital.
• •Nov 2025 (Dividend): Declared $0.12/share quarterly dividend. Confirms cash flow confidence despite heavy growth CAPEX.
• •Aug 2025 (M&A): Acquired HVMVLV (high-voltage electrical) to vertically integrate into power distribution, cementing the transition away from pure oilfield services.

Insider Trading Activity

• •Recent Activity (Dec 2025): Multiple Form 4 filings indicate routine year-end activity. No massive open-market sales detected despite the price run-up.
• •Institutional Participation: BlackRock participated significantly in the 2030 and 2031 convertible notes offerings, signaling strong institutional backing for the strategic pivot.

Current News & Market Context

• •Catalyst (Jan 8, 2026): Price target raised to $70 by analysts, validating the "AI Power" narrative.
• •Media Buzz (Jan 13, 2026): Highlighted as a "Data Center Power Provider" winner. The narrative shift from "Frac Sand" to "AI Power" is fully taking hold in retail and institutional psychology.
• •Litigation Risk: A class action lawsuit (Pirello v. SEI) alleges misleading statements regarding the Mobile Energy Rentals acquisition. Trader Note: The stock is up 27% in 20 days. The market currently views this lawsuit as noise/nuisance rather than a fundamental thesis breaker.

Business Model Analysis

• •The Pivot: SEI is no longer just a sand logistics company.
• •Revenue Mix: Power Solutions now contributes 63% of Total Revenue ($104.9M) and 77% of Adjusted EBITDA.
• •Pricing Power: High. Data centers are desperate for power and speed-to-market. SEI provides mobile turbines that bridge the gap while grid upgrades lag (3-5 year wait times).

Financial Health

Valuation Analysis

• •Reverse DCF: At $54.96, the market implies ~22% annual FCF growth for the next 5 years. Given the projected 2,200 MW capacity target by 2028 (up from ~760 MW current), this growth rate is achievable if execution holds.
• •Comparables: Trading at a premium to OFS peers but a discount to pure-play electrical equipment/data center suppliers (e.g., VRT, ETN). The "re-rating" trade is still active.

Competitive Position

SEI sits in a "Goldilocks" zone. They use mobile turbines (Solaris Mobile Turbines) originally designed for fracking to power data centers. This allows them to deploy power in months, not years. Traditional utilities cannot compete on this speed.

Management Quality

• •Strategic Vision: Management correctly identified the decline in OFS and pivoted aggressively to Power.
• •Capital Allocation: The use of Capped Calls on the convertible notes (up to $88/share) shows management is protecting shareholders from dilution up to significantly higher prices.

Risk Factors

1. •Execution Risk (High): They must deploy ~1,500 MW of new capacity by 2028. Supply chain delays on turbines could crush the growth story.
2. •Litigation (Medium): The short-seller report/lawsuit could cause volatility, though current price action ignores it.
3. •Customer Concentration (Medium): A large portion of power revenue comes from a few key data center/crypto operators.

Forensic Accounting Flags ⚠️

• •Receivables Spike: Accounts Receivable jumped to $130.3M (Sept 2025) from $71.7M (Dec 2024). This outpaces revenue growth slightly.
  • •Interpretation: Common in rapid growth phases, but monitor "Unbilled Revenue" ($7.6M) and DSO closely. If cash conversion slows, the debt service becomes heavier.

Technical Analysis & Trade Timing

• •Trend: STRONG UPTREND. Price > 10, 20, 50, 200 SMAs.
• •RSI (14): 60.40. Bullish. Not yet Overbought (>70). Room to run before exhaustion.
• •Bollinger Bands: Price is riding the upper band zone ($54-$57). A compression or flag pattern here would be healthy.
• •Reconciliation: Fundamentals justify the markup. Technicals confirm demand. No divergence detected yet.

Short-Term Trading Strategy (2-5 Days)

• •Timeframe: SWING_2_5_DAYS
• •Position Size: 3.5% of Portfolio
• •Entry: Look for a dip at the open to $54.20. If it reclaims $55.00 on volume, pyramid up.
• •Catalyst Timing: Trade the momentum leading into the next earnings cycle (expected late Feb).
• •Stop Loss: Trailing 3% stop or hard stop at $52.50 for short-term swing.
• •R/R Ratio: 1:3 ($2.50 risk for $7.50 upside to $62).

Investment Recommendation

RATING: BUY

SEI is a high-conviction Techno-Fundamental Buy. The company has successfully rebranded from a cyclical commodity service to a critical AI infrastructure provider. The technical trend is robust, supported by a massive fundamental improvement in revenue quality and margins. While the valuation is rich compared to history, it is cheap compared to the opportunity.

One-Liner Thesis: SEI is an arbitrage on the data center power shortage, utilizing legacy energy assets to solve the AI industry's biggest bottleneck, creating an asymmetric upside opportunity as the market re-rates the stock from "oilfield services" to "tech infrastructure."