APA Solar synergies and diversification strategy expand ARRY's growth potential, but price target is cut to $9

Overview

The report summarizes the long-term plan for APA Solar, balance-of-system component diversification strategy, capital allocation arrangements and valuation changes disclosed by ARRY at its August 20 investor event. The core view is that APA's customer synergies, engineered foundation products and international business can drive significant double-digit growth over the next three years, while software and the potential AWM acquisition expand the serviceable market; however, Goldman Sachs lowered its price target due to lower peer valuations.

Core views

First, the report views APA Solar as a key asset in ARRY's evolution from a standalone tracker supplier into a more comprehensive balance-of-system component platform. ARRY acquired APA in August 2025, gaining fixed-tilt mounting systems and engineered foundation solutions that complement its existing tracker technology. APA's Atlas product portfolio covers traditional foundations, alternative foundations and engineered foundations; Atlas II reduces the component count by more than half compared with the existing A-frame 2.0 and therefore has the potential to lower costs and shorten installation time. Following the acquisition, APA can leverage ARRY's larger utility-scale customer base and better access to capital, with average pipeline project size increasing by 155% from pre-acquisition levels, demonstrating cross-selling and customer synergies. Second, APA's growth plan depends not only on larger project sizes but also on improvements in its product and geographic mix. Management plans to increase engineered foundations' share of revenue from approximately 20% to approximately 50% in the near term and raise international revenue to approximately 15%. APA generated approximately $130 million in revenue in 2025, with 17% year-over-year growth in the first half of 2026; because weather constrained the core Northeast market in the first quarter, management expects growth to accelerate in the second half of 2026. Over the next three years, ARRY expects APA's revenue to achieve a significant double-digit compound growth rate, driven primarily by a higher share of engineered foundations and increased international sales. Management's long-term adjusted gross margin target is in the high-20% to low-30% range, broadly comparable to ARRY's adjusted gross margin guidance of 27%-28% for fiscal 2026, indicating that APA's expansion is not solely focused on revenue scale but also emphasizes a positive profit contribution. Third, ARRY is expanding its market opportunity and share of customer wallet through balance-of-system components, software and adjacent applications. The company estimates that its core US tracker serviceable market is approximately $4.3 billion, while the US foundation and fixed-tilt market added by APA is approximately $1.7 billion. APA's existing 150,000-square-foot manufacturing facility and its newly operational 130,000-square-foot plant in Bryan, Ohio, can support greater project volumes. The pending AWM acquisition is expected to add approximately $150 million in US cable management market opportunity and up to approximately $250 million globally, bringing the total identified opportunity to approximately $6.4 billion; AWM could also extend the platform into adjacent battery energy storage and data center markets. Meanwhile, software revenue grew more than 100% year over year, with an approximately 50% attach rate year to date and a retrofit opportunity exceeding 50GW, providing a foundation for further expansion of recurring, high-margin revenue. Fourth, management reiterated that its capital allocation priorities are to reinvest in organic growth first, maintain capital flexibility and prudently pursue strategic acquisitions. At the end of the second quarter of 2026, ARRY had more than $600 million of available net liquidity, including approximately $300 million in cash. Cash payments on APA preferred stock began in August and are expected to total approximately $11 million to $12 million in 2026 and approximately $35 million in 2027; its 6.25% interest rate remains more attractive than the cost of the company's current revolving credit facility. Management expects free cash flow to be sufficient to cover organic investment, preferred stock payments and bolt-on acquisitions and therefore believes diversification can proceed without sacrificing liquidity. Finally, Goldman Sachs lowered ARRY's 12-month price target from $11 to $9. The new price target applies a 10x P/E multiple, down from 12x previously; the multiple reduction reflects lower peer valuations and is applied to Goldman Sachs' forecast earnings per share for quarters five through eight. The current valuation and earnings forecasts do not yet include the pending AWM acquisition, so the AWM market expansion opportunity discussed in the report is not reflected in the price target calculation.

Analysis framework

The report first uses disclosures from the investor event to review APA's products, customer synergies and operating targets, and then incorporates market opportunities associated with engineered foundations, international sales, software and the potential AWM acquisition into ARRY's platform diversification thesis. It subsequently assesses the financial capacity to support the expansion strategy through liquidity, free cash flow and preferred stock payment arrangements, and finally applies a forward P/E multiple to earnings per share for quarters five through eight to derive a 12-month price target.

Methodology notes

• Valuation methodologyPE/PEG valuation

  Forward P/E price target methodology

  Goldman Sachs applies a 10x P/E multiple to forecast earnings per share for quarters five through eight to derive a 12-month price target of $9; it previously applied 12x, corresponding to an $11 price target.

• Company fundamentals and financial frameworkFree cash flow analysis

  Free cash flow coverage of capital requirements

  The report assesses the financial sustainability of the diversification strategy by determining whether free cash flow can cover organic investment, APA preferred stock payments and bolt-on acquisitions.

• Competitive and strategic framework

  Serviceable market and share-of-wallet expansion analysis

  The report separately estimates the tracker, foundation and fixed-tilt, cable management and incremental global markets, and evaluates the scope for platform diversification using cross-selling, software attach rates and adjacent applications.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Array Technologies Inc. (ARRY.US)

  APA Solar, the software business and the potential AWM acquisition are jointly driving the company's expansion from core trackers into a broader solar balance-of-system component platform.

  Strengths

  A large utility-scale customer base, more than $600 million in available net liquidity, APA product synergies and a rapidly growing software business.

  Weaknesses

  APA's recent growth was affected by weather in the Northeast market, while platform expansion still depends on increasing the share of engineered foundations, international sales and acquisition execution.

  Comparison

  The target valuation multiple was reduced from 12x P/E to 10x due to lower peer valuations.

  Risks

  Competition, customer attrition, patent protection, market demand, policy, and supplier product availability and pricing risks.

Key data

• APA acquisition dateAugust 2025The acquisition gave ARRY fixed-tilt systems and engineered foundation solutions
• APA average pipeline project size+155%Compared with the pre-acquisition level
• Atlas II component countReduced by more than halfCompared with the existing A-frame 2.0, potentially lowering costs and accelerating installation
• APA engineered foundation revenue share targetIncrease from approximately 20% to approximately 50%Management's near-term target
• APA international revenue share targetApproximately 15%Management target
• APA 2025 revenueApproximately $130mnUp 17% year over year in the first half of 2026
• APA revenue growth over the next three yearsSignificant double-digit CAGRDriven by a higher share of engineered foundations and growth in international sales
• APA long-term adjusted gross margin targetHigh-20% to low-30%Broadly comparable to ARRY's adjusted gross margin guidance of 27%-28% for fiscal 2026
• Core US tracker marketApproximately $4.3bnARRY's estimate of the core US serviceable market
• Incremental US market from APAApproximately $1.7bnCovering foundation and fixed-tilt systems
• APA manufacturing facilities150,000 square feet and 130,000 square feetThe latter is the newly operational plant in Bryan, Ohio
• Potential incremental market from AWMApproximately $150mn in the US and up to an additional approximately $250mn globallyThe acquisition remains pending
• Total identified market opportunityApproximately $6.4bnIncludes core trackers, APA and the potential AWM opportunity
• Software revenue growthMore than 100% year over yearApproximately 50% attach rate year to date
• Installed-base retrofit opportunityMore than 50GWSupports expansion of recurring, high-margin software revenue
• Available net liquidity at the end of the second quarter of 2026More than $600mnIncluding approximately $300mn in cash
• APA preferred stock cash paymentsApproximately $11mn-$12mn in 2026; approximately $35mn in 2027Cash payments began in August
• APA preferred stock interest rate6.25%Management said it remains more attractive than the current revolving credit facility
• 12-month price target$9, previously $11Based on a 10x P/E multiple, previously 12x

Impact & implications

The report believes APA's product innovation, transition toward engineered foundations, international expansion and utilization of ARRY's customer base can translate acquisition synergies into larger project sizes, significant double-digit growth and margins close to those of the group. Software and the potential AWM acquisition further expand recurring revenue and adjacent market opportunities, while ample liquidity and free cash flow support expansion; however, lower peer valuations have reduced the target valuation multiple and price target.

Risks

• Intensifying competition could affect orders, pricing and market share.
• Customer attrition could weaken pipeline scale and cross-selling effectiveness.
• Insufficient patent protection could weaken product differentiation and competitive advantages.
• Changes in market demand could affect growth in trackers, foundations and other balance-of-system components.
• Policy changes could affect solar project demand and implementation timelines.
• Changes in supplier product availability or pricing could affect delivery and costs.