By Mackenzie Tatananni

Array Technologies' gross margins could come under pressure in the face of sky-high tariffs, analysts believe.

BofA Securities made the case to sell the solar stock in a note Friday. Analysts downgraded Array to Underperform from Neutral and cut their price target to $7 from $8. Shares declined 2.5% to $7.66 on Friday.

Array couldn't immediately be reached for comment.

The firm cited a "tone split" between the excitement for long-term power growth opportunities, including those tied to data centers, and "caution on near-term execution" against a backdrop of macro uncertainty and regulatory hangups.

The firm's bearish thesis hinges on commentary from Array's second-quarter earnings call, where the company outlined the impact of tariffs on its business. Array lowered its gross margin targets to 28% to 29%, down from range of 29% to 30%.

Even the adjusted range is becoming "increasingly unrealistic," BofA analysts said. The firm sees incremental tariffs on imports from Mexico, which were previously exempt under USMCA, adding a 25% cost to key components. That's not to mention the additional 25% tariff on Indian components that compounded existing levies, bringing the total rate to 50%.

Paying tariffs appears to be the more economical option than sourcing materials from the U.S., seeing as domestically manufactured products can be twice as expensive to procure, the BofA team contended.

Array has indicated that the bulk of tariff costs will be passed along to customers. To make matters worse, the company sees limited ability for the industry to pull demand forward into the safe harbor window, in which solar project developers secure a year's tax credits by establishing that construction began by a certain date.

While customers representing around half of Array's backlog "have largely taken safe harbor action well ahead of time," remaining clients are more of a mixed bag.

"The company noted some safe harbor conversations where they are seeing inbound orders, but they are not seeing accelerated deliveries around safe harbor activity," BofA wrote.

Array doesn't manufacture solar panels themselves; rather, the company's main product is a single-axis tracker that moves solar panels during the day to maximize sunlight exposure.

The Albuquerque, N.M.-based company posted second-quarter earnings last month. Following the report, Citi Research analyst Vikram Bagi asserted that analysts should "celebrate small victories instead of waiting for big wins."

A considerable second-quarter beat and guidance raise in the quarter was overshadowed by gross margin miss and weaker net bookings. Still, Bagi pointed to "strong growth globally" for solar trackers, which generate more energy while delivering at a lower levelized cost.

"Array should benefit the growth in ground mounted solar, wider tracker adoption, and a relatively less fragmented subsector with only a handful of sizable competitors," Bagi wrote at the time. The analyst reiterated a Buy rating on the shares and raised his price target to $8.50 from $7.50.

Most analysts are split on whether to buy the stock or remain sidelined. Twelve of the 24 analysts tracked by FactSet rate Array at Buy or the equivalent, while 11 rate the stock at Hold and one at Underweight.

Array is set to report third-quarter earnings in November.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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September 12, 2025 11:47 ET (15:47 GMT)

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