Solar stock Array Technologies has outperformed this year, and Piper Sandler thinks there’s even more upside to come. Analyst Kashy Harrison upgraded Array Technologies to overweight from neutral, saying an improved forward outlook has the firm bullish on the manufacturer of solar tracking systems. “We are upgrading ARRY to Overweight from Neutral as we: i) believe the company’s strong order book creates the potential for an attractive ’23 revenue/EBITDA outlook (PSC: > 20% vs. consensus); ii) view ARRY as a beneficiary of IRA’s domestic content requirements along with the manufacturing credits; iii) like the new CEO’s focus on transitioning toward FCF generation (60-65% FCF/EBITDA conversion target) via more favorable CCC’s thereby enabling the company to organically de-lever the balance sheet; and iv) believe execution is starting to trend in the right direction,” Harrison wrote in a Sunday note. Solar stocks came under pressure this year as investors navigated policy and supply chain uncertainty. Regardless, the analyst expects that Array, which is up 13.6% in 2022, will continue to outperform. The firm’s price target of $28, up from $20, is 57.1% above Friday’s close of $17.82. Array Technologies rose 3.8% in Monday premarket trading. The company is set up to deliver strong revenue in 2023 and will be a beneficiary of the Inflation Reduction Act (IRA), Harrison said. To be sure, the analyst said there are near-term challenges around the Uyghur Forced Labor Prevention Act (UFLPA), which bans imported goods from the Xinjiang Uyghur Autonomous Region in China, but forecasted any issues for Array Technologies will be resolved by 2023. “We acknowledge near term risks associated with the UFLPA but see the potential for a more pronounced ’23 market recovery,” Harrison added. —CNBC’s Michael Bloom contributed to this report.
Piper Sandler upgrades Array Technologies, says solar stock can surge on improved forward outlook
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