Barclays downgrades Array Technologies on weak growth outlook, margin strain

Barclays downgraded Array Technologies (ARRY) to Equal Weight from Overweight with a $9 price target, citing slowing bookings, persistent margin pressure from tariffs, and limited underlying growth expected in 2026. In contrast, the firm maintained its Overweight rating on Nextracker (NXT) and raised its price target to $92, highlighting expanded U.S. market share via recent acquisitions and clearer earnings visibility, positioning Nextracker more favorably amidst industry-wide challenges like shifting trade rules and rising input costs.

Analysis

Barclays has downgraded Array Technologies (ARRY) to Equal Weight, setting a $9 price target, based on a deteriorating fundamental outlook characterized by slowing bookings and several quarters of soft orders. The firm projects minimal underlying growth for ARRY in 2026, excluding its APA acquisition, and identifies significant margin headwinds from tariffs and the potential dilution of cost pass-through benefits by shared incentives under the Inflation Reduction Act. In sharp contrast, Barclays reiterated its Overweight rating on competitor Nextracker (NXT) and raised its price target to $92. This bullish stance is predicated on NXT's successful acquisitions, which have nearly doubled its share of the U.S. solar equipment 'wallet' from roughly $0.10 to $0.18 per watt, providing superior earnings visibility. The analysis posits that investor focus is shifting from legislative tailwinds to operational execution, where NXT's broader product suite offers a competitive advantage, while ARRY lags in its strategic transition amidst persistent industry pressures from trade rules and input costs.

Key Decisions for Investors

• Investors could consider the divergent ratings as a basis for a pair trade, favoring a long position in Nextracker (NXT) over Array Technologies (ARRY) to capture the perceived gap in execution and market share growth.
• Holders of Array Technologies should closely monitor upcoming earnings for evidence of stabilizing bookings and margin recovery, as the current outlook points to significant fundamental pressures from tariffs and slowing orders.
• For those seeking exposure to the utility-scale solar sector, Nextracker's expanding product portfolio and clearer earnings visibility position it as a potentially more resilient investment against industry-wide headwinds.
• It is now critical to assess management's ability to navigate shifting U.S. trade policies and pass through rising input costs, as this has become a key differentiator for profitability among solar suppliers.