On Wednesday, Truist Securities adjusted its outlook on Array Technologies (NASDAQ: ARRY) shares, a company specializing in solar tracking solutions. The price target was lowered to $10.00 from the previous $12.00, while the firm maintained a Buy rating on the stock.
The adjustment comes amid concerns about potential delays in utility-scale solar projects and their impact on shipments scheduled for 2025. The analyst from Truist Securities noted that while issues such as permitting and interconnection are not quick fixes, an improved financing environment due to a cycle of rate reductions, along with the conclusion of the current anti-dumping/countervailing duty (AD/CVD) tariff investigation by the end of the year, could lead to better earnings visibility moving into 2025.
Array Technologies' management has indicated that 80% of its current backlog is expected to be delivered by the end of 2025, which accounts for more than 90% of the firm's revenue estimates for the period. Despite recent challenges, the analyst expressed confidence in the company's ability to recover market share and overcome project slippage that has affected sales in recent quarters.
Truist Securities' revenue and EBITDA estimates for Array Technologies remain unchanged at $947 million and $192 million for 2024, and $1.19 billion and $252 million for 2025. These figures are in contrast to the slightly higher Street estimates.
The firm acknowledges the ongoing challenges in the utility-scale solar sector, including potential risks from tariffs and renewed AD/CVD concerns. However, they view Array Technologies as well-positioned to capitalize on its unique solar tracker products once near-term headwinds subside.
The revised price target of $10 is based on applying a 9x multiple to the firm’s expected 2025 EBITDA of $252 million, a reduction from the previous multiple of 9x but still below the peer average of 12x. This new valuation reflects the persistent risks facing the sector while still recognizing the long-term value potential of Array Technologies.
In other recent news, Array Technologies reported Q2 earnings with revenue of $256 million, an adjusted gross margin of 35%, and an adjusted EBITDA of $55.4 million. However, the company revised its full-year 2024 guidance downward due to short-term project delays and other challenges.
Scotiabank adjusted its outlook on Array Technologies, reducing the price target to $12 from the previous $17 while maintaining a Sector Outperform rating. This adjustment was made in light of the downward revision of Array's financial year 2024 guidance.
Array Technologies has also announced the resignation of its Chief Legal Officer, Tyson Hottinger, effective October 31, 2024, with no internal disputes cited as the reason for his departure. In a strategic move to motivate its executive officers, the company launched a new incentive plan targeting long-term financial and operational goals. The plan introduces performance-based stock units for key executives, with potential aggregate grant values reaching up to 95% of the target award amount.
On the sustainability front, Array Technologies introduced a reusable packaging solution aimed at reducing waste and optimizing supply chain efficiency in the utility-scale solar sector. The company also launched SkyLink, a product that simplifies cable management and installation, and hosted industry-first insurance and customer events. These recent developments reflect Array Technologies' ongoing commitment to innovation and sustainability in the competitive solar energy industry.
InvestingPro Insights
To complement Truist Securities' analysis, recent data from InvestingPro sheds additional light on Array Technologies' financial position. The company's market capitalization stands at $1.07 billion, with a P/E ratio of 62.27, indicating a high earnings multiple as noted in one of the InvestingPro Tips. This valuation metric aligns with the challenges and potential growth opportunities discussed in the article.
InvestingPro data reveals that Array's revenue for the last twelve months as of Q2 2024 was $1.10 billion, with a concerning revenue growth decline of -38.88% over the same period. This decline supports the article's mention of recent challenges in the utility-scale solar sector and project delays affecting sales.
An InvestingPro Tip highlights that Array's stock price has fallen significantly over the last year, which is quantified by the -62.19% one-year price total return. This substantial decline reflects the market's reaction to the industry headwinds described in the article, including project delays and regulatory uncertainties.
Despite these challenges, another InvestingPro Tip suggests that Array operates with a moderate level of debt, which could provide some financial flexibility as the company navigates the current market conditions. Additionally, analysts predict the company will remain profitable this year, offering a glimmer of hope amidst the sector's turbulence.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Array Technologies, providing a deeper understanding of the company's financial health and market position.
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