On Friday, Citi made an adjustment to its stance on Array Technologies (NASDAQ:ARRY) stock, shifting from a Neutral to a Buy rating, although the price target was decreased to $14.00 from the previous $17.00. The change in rating comes after a notable decline in the company's stock value, which has dropped more than 40% this year.
The reasons cited for the stock's poor performance include concerns over delayed projects, an unexpected change in the Chief Financial Officer, potential near-term margin pressure due to increased freight costs, and a decrease in average selling prices (ASPs).
Citi's analysis suggests that while investors are preoccupied with the immediate challenges facing Array Technologies, the long-term growth prospects remain promising.
The firm anticipates that Array Technologies will not only recover lost market share within the year but will also conclude 2024 with a record backlog. This outlook is based on the expectation that the company's margin estimates for the following year have already accounted for the anticipated decline in ASPs.
The management of Array Technologies has expressed confidence in maintaining a 30% gross margin by 2025. In the interim, Citi points out that Array Technologies is projected to deliver a 9% free cash flow (FCF) yield, which stands out as one of the most attractive yields within the renewable sector. This financial metric is particularly significant as it indicates the efficiency and profitability with which the company converts its revenue into cash.
In summary, despite the recent challenges and the adjustment of the price target, Citi's upgrade reflects a positive outlook on the financial performance and market position of Array Technologies in the longer term.
The firm's analysis underscores the potential for Array Technologies to navigate through its current challenges and achieve a strong financial standing in the coming years.
InvestingPro Insights
As Citi shifts its stance on Array Technologies to a Buy rating, real-time data from InvestingPro provides additional context to the company's financial health and market performance. With a current market capitalization of approximately $1.64 billion and a P/E ratio of 28.2, Array Technologies is navigating through a period of volatility and transformation. The P/E ratio, adjusted for the last twelve months as of Q1 2024, stands at 29.39, reflecting investor sentiment about the company's earnings potential.
InvestingPro Tips highlight that Array Technologies is expected to see net income growth this year, an encouraging sign for potential investors. However, with 16 analysts revising their earnings downwards for the upcoming period, there is an air of caution in the market. Additionally, the company's stock has experienced significant return over the last week, but it is trading at a high Price/Book multiple of 7.1, which may suggest a premium valuation compared to its book value.
For readers who wish to delve deeper into the financial intricacies and future projections of Array Technologies, there are additional InvestingPro Tips available. These can offer further guidance on whether the company's current market position aligns with your investment strategy. To explore these insights and make more informed decisions, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at https://www.investing.com/pro/ARRY. There are 12 more InvestingPro Tips waiting to be discovered, which could provide a valuable edge in your investment considerations.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.