New Terrain-Following Trackers Will Strengthen Global Solar Market Presence

Key Takeaways

• Strategic investments in innovation and international markets position Array Technologies for robust revenue growth and market expansion.
  
• Favorable U.S. policies and demand for solar projects support strong future growth in revenue and margins.
  
• Delays, regulatory hurdles, and currency devaluation threaten revenue, while competitive pressures and acquisition issues may hinder profitability and earnings.

Catalysts

Manufactures and sells ground-mounting tracking systems used in solar energy projects in the United States, Spain, Brazil, Australia, and internationally.

• Array Technologies is anticipating strong double-digit growth for 2025, supported by a substantial portion of its current order book being scheduled for delivery within this time frame, providing high revenue visibility.
  
• The company's ongoing investments in strategic customer engagement and innovative products, such as the new OmniTrack terrain-following tracker and 77-degree tracker, are expected to drive higher win rates and revenue growth.
  
• Array's significant presence in international markets, like its leading market share in Brazil for distributed generation projects, positions it for international revenue expansion.
  
• Potential improvements in U.S. market dynamics, such as a more favorable financing environment and clarity on tariffs and incentives, could alleviate project delays and enhance project realization, positively impacting revenue and earnings.
  
• Continued legislative support for solar energy within the U.S., coupled with strong demand drivers for utility-scale solar projects, positions Array for robust future growth in revenue and margins due to its status as a key player in the solar market.

Array Technologies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Array Technologies's revenue will grow by 12.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -15.2% today to 7.3% in 3 years time.
• Analysts expect earnings to reach $100.8 million (and earnings per share of $0.48) by about December 2027, up from $-148.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $193.2 million in earnings, and the most bearish expecting $25 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.7x on those 2027 earnings, up from -5.6x today. This future PE is greater than the current PE for the US Electrical industry at 23.9x.
• Analysts expect the number of shares outstanding to grow by 11.36% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.38%, as per the Simply Wall St company report.

Array Technologies Future Earnings Per Share Growth

Risks

• Project pushouts and delays, particularly in international markets like Brazil, could negatively impact revenue and cash flow predictability.
  
• Regulatory uncertainties related to antidumping tariffs and interconnection issues may continue to create volatility and deferred projects, which can influence short-term revenue and earnings.
  
• A significant goodwill impairment charge from a past acquisition has already affected net income and may indicate challenges in generating expected returns from strategic acquisitions.
  
• Currency devaluation, such as the Brazilian real's impact on revenue translation, could adversely affect earnings due to market exposure outside the U.S.
  
• Competition in domestic and international markets, combined with potential strategic requirements to share tax credits, could pressure margins and reduce overall profitability.

Valuation

• The analysts have a consensus price target of $10.22 for Array Technologies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $22.0, and the most bearish reporting a price target of just $4.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be $1.4 billion, earnings will come to $100.8 million, and it would be trading on a PE ratio of 27.7x, assuming you use a discount rate of 9.4%.
• Given the current share price of $5.47, the analyst's price target of $10.22 is 46.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.