Array Technologies Inc: Solar Stock Presents an Opportunity After 60% Discount

Market Underestimating ARRY Stock

Solar stocks surged following the election win by President Joe Biden. However, the initial momentum has faded.

The Invesco Solar ETF (NYSEARCA:TAN) spiked to a record $125.98 on January 25 but has since plummeted to the $80.00 handle. Clearly, the market wants to see what Biden does to fuel demand for the solar industry. This could mean credits and rebates.

Chart courtesy of StockCharts.com

Regardless, I am confident about the future of solar power, since it’s plentiful and cheap to produce after the initial costs.

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But instead of playing the extremely competitive solar panel sector, I suggest that investors look at the makers of other critical parts.

Take the case of Array Technologies Inc (NASDAQ:ARRY). The company builds the ground-mounting systems used to adjust the angle of solar panels to maximize the power generated.

Array Technologies stock debuted with its initial public offering (IPO) on October 15, 2020 at the subscribed price of $22.00.

ARRY stock surged to $54.78 in January 2021 on the Biden enthusiasm. However, the stock has since declined to below its IPO price, where I like the risk/reward opportunity.

Chart courtesy of StockCharts.com

Array Technologies Inc Targeting Revenues of Over $1.0 Billion

While shares of Array Technologies are being dumped in the market, the company has been generating strong fundamentals.

The three-year revenue picture shows impressive growth in 2019, followed by some moderation in 2020. However, the company still produced record revenues at a healthy 34.7% growth rate.

Fiscal YearRevenues (Millions)Growth
2018$290.8N/A
2019$647.9122.8%
2020$872.734.7%

(Source: “Array Technologies Inc.” MarketWatch, last accessed August 13, 2021.)

While the expected growth rate is normalizing, analysts estimate that Array Technologies will deliver over $1.0 billion in revenues in 2021 or 2022.

The consensus estimate is that the company will generate $991.5 million in revenues this year, but there’s a high estimate of $1.1 billion. (Source: “Array Technologies, Inc. (ARRY),” Yahoo! Finance, last accessed August 13, 2021.)

Array Technologies Inc is expected to ramp up its growth to 18.2% for 2022, delivering revenues of $1.2 billion.

After negative earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2018, the company delivered two strong years of higher EBITDA income, to a record high in 2020.

Fiscal YearEBITDA (Millions)Growth
2018-$32.8N/A
2019$114.1447.8%
2020$151.132.4%

(Source: MarketWatch, op. cit.)

Array Technologies Inc also moved to generally accepted accounting principles (GAAP) earnings-per-share (EPS) profitability in 2019 and 2020.

Fiscal YearGAAP Diluted EPSGrowth
2018-$0.48N/A
2019$0.31165,4%
2020$0.4748.6%

(Source: MarketWatch, op. cit.)

On an adjusted basis, Array Technologies delivered $0.93 per diluted share in profits in 2020. This figure is expected to fall to $0.43 this year before recovering to $0.80. However, it’s predicted to go as high as $0.98 per diluted share in 2022. (Source: Yahoo! Finance, op. cit.)

Array Technologies Inc’s free-cash-flow (FCF) picture has been mixed so far as the company works on ramping up its revenues. With Array Technologies’ expected jump in revenues, watch for its FCF to improve.

Fiscal YearFCF (Millions)Growth
2018-$13.8N/A
2019$184.42,885%
2020-$159.6-141.5%

(Source: MarketWatch, op. cit.)

Array Technologies currently carries a debt load of $498.2 million, which will need to be addressed. I don’t see any issues, however, given the revenue growth and profitability. (Source: Yahoo! Finance, op. cit.)

Analyst Take

Array Technologies stock has broad institutional support, with 285 institutions holding the vast majority of the shares. (Source: Yahoo! Finance, op. cit.)

Considering the major price deterioration, I like the upside prospects for ARRY stock, given the company’s strong fundamentals.

And considering that Array Technologies Inc trades at a reasonable two times its consensus 2022 revenue estimate, it’s definitely attractive in this market.