On Wednesday, Piper Sandler adjusted its price target for Array Technologies (NASDAQ:ARRY), a company specializing in solar tracking solutions. The firm increased the target to $13.00 from the previous $12.00 while keeping a Neutral stance on the stock. The adjustment comes amidst expectations of the company's first-quarter EBITDA to fall below the median Bloomberg expectations, which Piper Sandler and the Street set at $13.1 million and $14.2 million, respectively.
The firm anticipates Array Technologies to experience a shift in its sales mix, with a higher proportion of international sales due to a decrease in domestic market share from the year before. Despite this, the focus is expected to be on the company's order intake, pricing strategies, and operational bottlenecks rather than the immediate financial results.
Analysts predict that Array Technologies' orders will generally see an improvement in 2024 compared to the second, third, and fourth quarters of 2023, attributing this to lower pricing relative to the previous year. The company is expected to undertake contracts that will sustain a mid-20% gross margin, although it will be critical to discern how much of the pricing reduction is anticipated to come from future cost decreases.
Looking forward, while Array Technologies is projected to see a rise in orders throughout 2024, potentially leading to a year-end backlog of $2.5 billion, there are concerns regarding the conversion of this backlog into revenues in 2025.
Extended lead times for transformers and circuit breakers may hinder the company's ability to meet revenue expectations as optimistically as the Street currently forecasts. Piper Sandler's reiterated Neutral rating and the revised price target reflect these considerations.
InvestingPro Insights
Piper Sandler's recent price target adjustment for Array Technologies is well-timed, as InvestingPro data shows that the solar tracking solutions company is navigating through a challenging period. With a market capitalization of $2.16 billion, Array Technologies is trading at a price-to-earnings (P/E) ratio of 25.04, which aligns closely with the adjusted P/E ratio for the last twelve months as of Q4 2023 of 24.86, indicating a consistent valuation over the recent period.
While the revenue has seen a slight decline of 3.72% over the last year, it's important to note the company's solid financial footing. One of the InvestingPro Tips suggests that Array Technologies operates with a moderate level of debt, which is a positive sign for investors concerned about financial stability. Additionally, the company's liquid assets surpass its short-term obligations, providing further evidence of its financial health.
However, the stock has experienced significant volatility, with a six-month total return of -33.74%, reflecting the caution expressed by Piper Sandler. Despite this, analysts on InvestingPro are optimistic about the company's profitability, predicting it will remain profitable this year. This is corroborated by a robust gross profit margin of 26.36% and an EBITDA growth of a staggering 270.5% over the last twelve months.
For investors looking for more in-depth analysis, there are additional InvestingPro Tips available, which could provide further insights into Array Technologies' performance and outlook. To gain access to these valuable insights, consider using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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