Our target price for ARRY is based on an average of three valuation methodologies. In our EV/EBITDA-based methodology, we apply a 12.0x multiple to our 2026 EBITDA estimate and discount it back to calculate NTM value/sh. In our DCF valuation, we calculate ARRY's WACC to be ~8% based on our assumptions for equity risk premium and risk-free rate in the long term. We apply a 4% terminal growth rate. In our P/E approach, we apply an 18.0x multiple to our estimated 2026E earnings. Our PE multiple is at a slight discount to the peers given the company has lagged its main competitor in terms of growth.

We rate ARRY High Risk due to its high volatility as well as relatively high leverage. Though the market for trackers is relatively less fragmented, competition between largest players is stiff. Downside risks to the shares reaching our target price include: 1) slower-than-expected growth in solar adoption, 2) technological advancements by competitors rendering ARRY's technology obsolete, 3) scarcity of capital for growth, 4) volatility in commodity prices eroding company margins, and 5) unfavorable government/regulatory actions. Upside risks could come from greater-than-expected solar adoption and above-expectations orders following the release of domestic content guidance.