BMO Capital Markets has adjusted its outlook on Array Technologies (NASDAQ:ARRY), a leading solar technology company, by lowering the price target to $11 from $15.
The firm, however, maintained its Market Perform rating on the stock. The revision comes after Array Technologies reported a significant reduction in its full-year 2024 guidance, which was affected by several challenges in the solar industry.
The second quarter of the solar earnings season has witnessed various hurdles such as solar project delays due to ongoing interconnection and permitting issues, financing delays, and recent policy uncertainties. These factors have heavily influenced Array Technologies, resulting in a deeper than anticipated cut in their guidance for the fiscal year 2024.
According to BMO Capital, these issues are considered to be postponements rather than outright project cancellations. Nevertheless, the firm has notably reduced its fiscal year 2024 estimates for Array Technologies. Additionally, the company's backlog saw an unexpected decline of approximately $200 million, which was attributed to a combination of lower steel prices, foreign exchange rate fluctuations, and changes in project scope.
The analyst from BMO Capital remarked on the situation, stating, "These are largely push outs versus cancellations, and we are reducing our FY 2024 estimates meaningfully."
Array Technologies reported Q1 revenue of $153 million, slightly above their high-end guidance, and adjusted gross margins of 38.3%. Despite this, Array Technologies has experienced project delays in the United States and Brazil, leading to Oppenheimer reducing its price target to $17 from $20.
Similarly, Piper Sandler revised its price target for the company from $14.00 to $8.00, while Roth/MKM downgraded Array Technologies from Buy to Neutral. On the other hand, Citi upgraded the company to 'Buy', anticipating a recovery of lost market share and a record backlog by 2024, despite a decrease in the price target to $14.00.
The company maintains its full-year revenue guidance of $1.25 billion to $1.4 billion. However, the resignation of CFO Kurt Wood has raised investor concerns.
InvestingPro Insights
Amidst the challenges faced by Array Technologies, InvestingPro data sheds light on the company's current financial health and stock performance. As of the last twelve months leading up to Q1 2024, Array Technologies holds a market capitalization of $1.36 billion. Despite the recent reduction in guidance, analysts predict that the company will be profitable this year, with a P/E ratio of 24.42, indicating investors' expectations for future earnings growth. The company's revenue has seen a decline of 21.04% over the last twelve months, aligning with the sales decline anticipated by analysts.
InvestingPro Tips suggest that Array Technologies operates with a moderate level of debt and has liquid assets that exceed its short-term obligations, providing a degree of financial flexibility. However, the stock price has experienced significant volatility, currently trading near its 52-week low and having fallen by nearly 60% over the past year. This could present a potential opportunity for investors looking for an entry point into the solar technology market, especially as the company is trading at a high Price/Book multiple of 5.9, which may reflect its asset-based valuation.
For those interested in a deeper analysis, InvestingPro offers additional tips on Array Technologies, which can be found at InvestingPro.
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