On Wednesday, Citi revised its price target for Array Technologies (NASDAQ:ARRY), a company specializing in solar tracking solutions, to $16 from the previous $16.50, while retaining a Neutral stance on the stock.
The adjustment came after Array Technologies reported its fourth-quarter earnings for 2023, which aligned closely with the estimates, excluding the Investment Tax Credit (ITC) benefit.
Array's revenue for the quarter surpassed expectations but reduced margins and increased operational expenditures tempered this. The company's forecast for fiscal year 2024 fell short of the average analyst predictions, with revenue and earnings per share (EPS) projections missing by approximately 29% and 13%, respectively.
Despite this, Array Technologies anticipates a gross margin in the low-30s percentage range for 2024, with a boost from around $40 million in ITC benefits recognized in 2023.
The company's decision to include the ITC benefit in its adjusted results has been met with considerable debate due to the one-time nature of the credit and the discrepancy in timing. Nonetheless, Array Technologies has seen its order pipeline triple, an increase in its win rate, and a book-to-bill ratio of 1.7 times in the fourth quarter of 2023, thanks to lower pricing achieved through cost improvements.
Citi forecasts that Array Technologies' stock might experience a slight decline, influenced by the weaker revenue outlook, results skewed towards the second half of the year, and investor tendencies to disregard the 2023 ITC benefit when considering the company's 2024 prospects. However, these concerns are somewhat mitigated by the growth in the company's backlog and the overall negative market sentiment prior to the earnings report.
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