Array Technologies downgraded at BofA on margin pressures, tariff risks

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Array Technologies (NASDAQ:ARRY [https://seekingalpha.com/symbol/ARRY]) on Friday was downgraded to Underperform from Neutral by analysts at Bank of America who cited heightened margin risks and limited near-term catalysts.

Despite a nearly 50% rally in Array’s (NASDAQ:ARRY [https://seekingalpha.com/symbol/ARRY]) stock in the past month, optimism around safe harbor demand pull-forward appears overstated, said research analyst Dimple Gosai in a Sept. 12 note to clients. Smaller developers are more likely to prioritize transformers than trackers in safe harbor strategies, she said.

MARGIN PRESSURES FROM TARIFFS

Array (ARRY [https://seekingalpha.com/symbol/ARRY]) recently trimmed its 2025 gross margin guidance to 28% to 29% from 29% to 30% amid commodity and tariff pressures. Bank of America highlighted that new tariffs on components imported from Mexico, previously exempt under the USMCA trade agreement, will add 25% costs to items like gearsets. Similar 25% tariffs on Indian components are expected in November, compounding the strain.

Although Array (ARRY [https://seekingalpha.com/symbol/ARRY]) is passing along about three-quarters of these costs to customers, Gosai noted the company is also sharing some benefits from the Inflation Reduction Act’s 45X production credits, which could further weigh on profitability.

LIMITED UPSIDE FROM SAFE HARBORING

Bank of America is skeptical that safe harbor incentives will generate meaningful near-term demand. Array (ARRY [https://seekingalpha.com/symbol/ARRY]) itself has stressed that permitting, interconnection delays, and labor bottlenecks limit the industry’s ability to accelerate project schedules. While Tier 1 customers have largely locked in safe harbor benefits, Tier 2 developers remain mixed, and any potential disruption would likely emerge years down the line.

OUTLOOK

Array (ARRY [https://seekingalpha.com/symbol/ARRY]) continues to push for market share gains in U.S. utility-scale trackers, supported by domestic content positioning and new products such as Omni and Skytrak. But Gosai said near-term headwinds outweigh these positives, particularly with tariff costs set to rise and safe harbor benefits less impactful than hoped.

Bank of America values Array through a blended enterprise value-to-ebitda and discounted cash flow approach, applying peer multiples in the solar and clean energy sector. The bank cut its price objective on Array (ARRY [https://seekingalpha.com/symbol/ARRY]) to $7 from $8 a share.

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