Array Technologies (NASDAQ: ARRY) is a leading global provider of solar tracking systems, which are essential for utility-scale solar projects. The company’s trackers increase energy yield by up to 25% compared to fixed-tilt systems, making them a critical component in the energy transition. Despite recent headwinds from steel costs and supply chain disruptions, Array is poised for a significant inflection in 2025 driven by robust demand, improving margins, and a strong balance sheet.
Investment Thesis
Array Technologies is uniquely positioned to benefit from the accelerating build-out of utility-scale solar in the US, supported by the Inflation Reduction Act (IRA) and corporate renewable energy procurement. The company has a dominant market share in the US solar tracker market (over 50%) and is expanding internationally. After a period of margin compression due to rising steel prices and logistics costs, Array is now seeing input costs stabilize and is passing through price increases, leading to margin recovery. The company’s backlog remains at record levels, providing multi-year revenue visibility.
12-Month Catalysts
- Margin Expansion: As steel prices moderate and supply chain normalizes, Array’s gross margins are expected to expand from the low 20% range to the mid-20% range, driving significant earnings leverage.
- Backlog Conversion: With a backlog of over $2 billion, much of which is contracted with price escalators, revenue growth is well-supported. The company is expected to deliver 20%+ revenue growth in 2025.
- IRA Benefits: The IRA’s domestic content bonus and investment tax credit extensions are driving a surge in utility-scale solar project announcements, directly benefiting Array’s order book.
- International Expansion: Array is gaining traction in markets like Brazil, Australia, and the Middle East, diversifying its revenue base and reducing reliance on the US.
Key Risks
- Steel Price Volatility: Steel is a key input for solar trackers. A sharp increase in steel prices could compress margins if not fully passed through to customers.
- Project Delays: Utility-scale solar projects face permitting, interconnection, and supply chain risks that could delay backlog conversion and revenue recognition.
Valuation
Array trades at approximately 12x forward EBITDA, a discount to its historical average and to peers like Nextracker (NXT) and FTC Solar. As margins improve and growth accelerates, the stock could re-rate to 15-18x EBITDA, offering significant upside.
Balance Sheet
Array has a net debt position of around $300 million, but with strong free cash flow generation expected in 2025, leverage is manageable. The company has ample liquidity with a $200 million revolver and no near-term maturities.
Disclaimer: This is not financial advice. Investing involves risk, including potential loss of principal. Please conduct your own research or consult a financial advisor before making investment decisions.