Tariffs And Uncertainties Will Disrupt Solar Deployments Yet Spark Resilience

Key Takeaways

• Regulatory uncertainty, rising input costs, and global competition threaten consistent revenue growth and margin stability, despite strong demand and product innovation.
  
• International expansion faces headwinds from macroeconomic instability, while project cancellations and customer concentration fuel ongoing revenue unpredictability.
  
• Regulatory uncertainty, trade policy risks, rising competition, and integration challenges threaten Array Technologies' revenue predictability, margin stability, and long-term pricing power.

Catalysts

Manufactures and sells solar tracking technology products in the United States, Spain, Brazil, Australia, and internationally.

• While global decarbonization initiatives and rising solar project pipelines should lead to sustained high demand for utility-scale solar trackers, ongoing regulatory uncertainty in the US regarding tax credits, safe harbor rules, and foreign entity restrictions could result in significant project delays and uncertain booking visibility, posing downside risks to future revenue and earnings growth.
  
• Despite advancements in Array's tracker design, such as the highly innovative Hail XP and increasing adoption of products like OmniTrack and SkyLink, rising input costs from tariffs, new trade barriers (including newly announced tariffs on Indian imports), and persistent volatility in commodity prices threaten to compress gross margins and disrupt cost control over the next several years.
  
• While international expansion, particularly into Latin America and EMEA, could drive diversification and new growth, macroeconomic headwinds such as high interest rates and political or economic instability in key markets (e.g., 15% rates in Brazil causing project timeline pushes) introduce sustained unpredictability to Array's addressable market and limit the reliability of international revenue contributions.
  
• Even as Array benefits from the industry trend toward larger gigawatt-scale solar installations and growing tracker attachment rates, escalating global competition, particularly from lower-cost Asian manufacturers, increases the risk of price erosion and margin pressure, undermining long-term earnings power.
  
• Although the company has implemented operational efficiency programs and taken proactive steps to exit low-margin legacy contracts, the risk of ongoing project debookings, cancellations, and continued customer concentration remains elevated-potentially leading to lumpy revenue realization and inconsistent net margin progression in future periods.

Array Technologies Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Array Technologies compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Array Technologies's revenue will decrease by 0.9% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -22.7% today to 9.6% in 3 years time.
• The bearish analysts expect earnings to reach $115.3 million (and earnings per share of $0.51) by about August 2028, up from $-265.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 11.0x on those 2028 earnings, up from -3.2x today. This future PE is lower than the current PE for the US Electrical industry at 30.6x.
• Analysts expect the number of shares outstanding to grow by 0.53% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.13%, as per the Simply Wall St company report.

Array Technologies Future Earnings Per Share Growth

Risks

• Ongoing regulatory uncertainty in the US solar market, including changes to tax credits, foreign entity restrictions, and safe harbor criteria, is creating project delays and cautious customer behavior, which could negatively affect Array's booked revenues and order flow over the medium to long term.
  
• Exposure to increased tariffs and evolving global trade policies, such as new 25% tariffs on imports from India, raises input costs and compresses gross margins, especially as not all tariff-related expenses can be passed through or marked up to customers.
  
• Elevated interest rates in key international markets such as Brazil-currently at a 15-year high-are slowing down project execution and financing, resulting in quarter-to-quarter volatility in international bookings and limiting predictable global revenue streams for Array Technologies.
  
• Increasing operational complexity and risk associated with the company's expansion into new products and acquisitions, such as the integration of APA Solar and development of new tracker platforms, may create unexpected costs or integration issues and thus pressure net margins and return on invested capital.
  
• The combination of rising industry-wide competition-particularly from lower-cost Asian manufacturers-and possible commoditization of tracker hardware threatens Array's pricing power and could erode both revenues and gross margin over the long term if technology differentiation is not sustained.

Valuation

• The assumed bearish price target for Array Technologies is $6.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Array Technologies's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $13.0, and the most bearish reporting a price target of just $6.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $1.2 billion, earnings will come to $115.3 million, and it would be trading on a PE ratio of 11.0x, assuming you use a discount rate of 11.1%.
  
• Given the current share price of $5.5, the bearish analyst price target of $6.0 is 8.3% 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.