Is Array Technologies (ARRY) a Mispriced Opportunity in the Renewable Energy Transition?

The renewable energy transition has created a fertile ground for innovation, but few companies have navigated its challenges as dynamically as Array Technologies (ARRY). With a 70% year-over-year revenue surge in Q3 2025 and a $1.9 billion order book, the solar tracker manufacturer has positioned itself as a key player in the U.S. utility-scale solar market. Yet, despite these fundamentals, its stock trades at a 16–20% discount to intrinsic value estimates derived from discounted cash flow (DCF) models. Is this dislocation a sign of market caution, or does it represent a mispricing of Array's long-term potential?

Financial Performance: A Story of Resilience and Growth

Array's Q3 2025 results underscore its ability to scale amid macroeconomic headwinds. Revenue hit $393.5 million, up 70% year-over-year, driven by a 56% volume increase and the $16.9 million contribution from the APA Solar acquisition according to earnings. Adjusted EBITDA surged 55% to $72.2 million, with margins expanding to 18.3%. The company's updated full-year guidance-$1.25 billion to $1.28 billion in revenue-reflects confidence in its market position, particularly as 95% of its $1.9 billion order book is domestic.

However, challenges persist. Commodity inflation and tariffs have pressured gross margins, which fell to 26.9% (adjusted 28.1%) in Q3. Array has mitigated this by reducing tariff exposure to less than 14% of its bill of materials through onshoring initiatives. Free cash flow, while robust at $22 million in Q3, was lowered to $100 million for 2025 due to acquisition costs and timing delays. These factors highlight the tension between near-term execution risks and long-term growth potential.

DCF Analysis: A Case for Undervaluation

DCF models suggest Array is significantly undervalued. A 2025 Yahoo Finance analysis estimates intrinsic value at $10.27 per share, a 12.8% discount to its $8.95 price at the time. Alpha Spread's model arrives at $14.62, implying a 39% undervaluation relative to $8.85. These divergent valuations hinge on assumptions about long-term growth rates. The Yahoo model assumes free cash flow will rise to $135.5 million by 2029, with a terminal growth rate aligned with the renewable energy sector's 5–7% long-term potential. Array's weighted average cost of capital (WACC) of 10.06% further supports the case for undervaluation. At this discount rate, the company's projected cash flows-bolstered by its $1.9 billion order book and 40% contribution from new products like OmniTrak and Hail XP-justify a premium to current levels. Analysts have echoed this sentiment, with UBS raising its price target to $15 from $9 and Seaport Global setting a $12 target.

Technical Indicators: Momentum vs. Volatility

Technically, Array's stock exhibits mixed signals. The 50-day moving average ($8.10) crosses above the 200-day ($7.80), forming a "golden cross" bullish pattern. Relative Strength Index (RSI) at 65.4 suggests neutral conditions, while the MACD line remains above the signal line, reinforcing upward momentum. However, stochastic and Williams %R indicators signal oversold conditions, with values of 36.496 and -65.358, respectively.

The stock's proximity to its 52-week high of $10.38-just 9% away-highlights its strong relative performance. A ChartMill Relative Strength (CRS) score of 91.95 indicates it outperforms 92% of stocks over the past year. Yet, volatility remains a concern. A Setup Quality rating of 3 (on a 10-point scale) suggests caution for immediate entry, with key support levels at $8.33 and $7.55.

Risks and Cautionary Factors

While Array's fundamentals are compelling, risks linger. The APA Solar acquisition, though accretive to revenue, slightly diluted adjusted gross margins in Q3. Tariff and trade policy uncertainties could resurface, particularly as the U.S. administration reviews solar supply chain policies. Additionally, the company's reliance on the U.S. market-95% of its order book is domestic-exposes it to regulatory shifts or permitting delays.

Conclusion: A Mispricing of Optimism or Caution?

The 16–20% undervaluation of Array's stock appears to reflect a blend of optimism and caution. On one hand, DCF models and analyst upgrades suggest the market underappreciates the company's ability to scale its order book and innovate in a $500 billion solar tracker market. On the other, technical volatility and margin pressures indicate lingering skepticism about execution risks. For investors with a 3–5 year horizon, the current price offers a compelling entry point, particularly if Array can maintain its 28% adjusted gross margin and deliver on its $1.25 billion revenue target.

As the renewable energy transition accelerates, Array Technologies' ability to balance growth with margin discipline will determine whether this valuation dislocation is a fleeting correction or a lasting opportunity.