On Wednesday, BofA Securities revised its stance on Array Technologies (NASDAQ:ARRY), moving from a Buy rating to Neutral and reducing the price target significantly to $7.00 from the previous $11.00. The adjustment comes as a response to growing uncertainties in the support mechanisms for utility-scale solar projects. These concerns center around the potential weakening or repeal of incentives under the Inflation Reduction Act (IRA), which could adversely affect the volume of projects.
Array Technologies has been facing risks related to the future of the 45X tax credits, which are integral to the company's margin growth. These credits and the possibility of more components qualifying for them have been a substantial factor in ARRY's financial performance. Despite these concerns, the valuation of ARRY's stock remains attractive, according to BofA Securities. The firm acknowledges that Array Technologies has been successful in expanding its market share, which may offer some degree of resilience amidst the challenges.
The downgrade reflects a cautious stance on the part of BofA Securities due to the potential policy shifts that could influence Array Technologies’ business operations. The IRA incentives have been a critical driver for the utility-scale solar industry, and any changes could have a material impact on companies like ARRY that operate within this sector.
The new price target of $7.00, down from $11.00, suggests that BofA Securities sees limited upside for the stock in the near term, factoring in the risks associated with the evolving policy landscape. This price target revision and rating downgrade are indicative of the analyst's recalibrated expectations for Array Technologies' financial outlook.
While the report acknowledges the risks that Array Technologies is facing, it also highlights the company's achievements in capturing a larger share of the market. This progress could help mitigate some of the negative effects from the uncertain policy environment, providing a buffer for the company's performance.
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