New Mexico-based solar panel tech company Array Technologies (NASDAQ:ARRY) made its debut as a publicly traded company recently. Upon its initial public offering (IPO), ARRY stock generated a great deal of buzz as traders quickly bid up the share price.
Perhaps this shouldn’t come as a huge surprise. After all, both IPO’s and solar technology are hot topics in 2020. On the other hand, investing in IPO’s requires extra research since newly listed companies can be risky.
Interestingly, not just one but two different InvestorPlace contributors have recommended waiting for a pullback before taking a long position in Array Technologies stock. Larry Ramer advises waiting until after the 2020 U.S. presidential election before buying the stock.
Meanwhile, Matt McCall and the InvestorPlace research staff assert that Array Technologies stock “too hot to touch” after its post-IPO price surge. So, let’s dive in and decide whether this stock deserves a place in your solar-niche portfolio.
A Closer Look at Array Technologies Stock
It’s normal for companies to establish a price for an IPO stock, only to have the stock start trading at a higher price. We can call it unfair, but it’s a fact of life that insiders typically get to buy the shares at a better price than the public.
Array stock provides a textbook example of this. The company originally set the IPO price for the stock at $22 per share. Wouldn’t it be nice if we all could have bought the stock at that price?
The underwriters had an option to purchase a certain number of shares at the public offering price. The rest of us had to buy at higher prices as the first trade of Array Technologies stock was 34% above the IPO price.
On Oct. 23, Array Technologies stock closed at exactly $42. Thus, the IPO hype hasn’t worn off yet. Be advised, though, that there’s usually a cooling off period for hot IPO stocks. This alone could be a compelling reason to stay on the sidelines and wait for a pullback.
Waiting to Pounce
McCall and the InvestorPlace research staff correctly cite “America’s pivot toward green energy” and “the long-term solar megatrend” as reasons to lean bullish on Array Technologies stock over the long term.
Array Technologies makes ground-mounting systems for solar panels, and the company is currently profitable. During the six months that ended on June 30, Array Technologies earned $76.1 million in net income and $552.6 million in revenues.
During the same period of the prior year, the company recorded a net loss of $5.2 million. Moreover, the company only posted revenues of $255.4 million during that period. Therefore, Array Technologies appears to be in expansion mode this year.
Yet, McCall and the InvestorPlace research staff cite the IPO lock-up period as a reason to wait before pouncing on Array Technologies stock. In six months, after the lock-up period ends, insiders might unload their shares. And that, of course, could put negative pressure on the stock price.
A Pivotal Event
Furthermore, both McCall and the InvestorPlace research staff and Ramer cite the upcoming Nov. 3 election as a reason to wait before buying Array Technologies stock.
We won’t get too political here. Suffice it to say that one presidential candidate tends to support solar energy more than the other. In July, one candidate announced a $2 trillion spending plan that would focus heavily on clean energy.
Array Technologies stock is trading as if that presidential candidate already won the election. However, as we learned in 2016, U.S. presidential elections can be unpredictable.
Hence, it’s wise to take a wait-and-see stance with Array Technologies stock. Certain assumptions might already be priced into the stock, and an election-time surprise could induce a share-price pullback.
The Bottom Line
My colleagues at InvestorPlace have provided strong arguments to wait before considering Array Technologies stock. So, I highly recommend reading their articles.
Between the lock-up period and the imminent presidential election, there’s too much uncertainty to buy the stock now. Yet, if the share price does pull back, that would be a prime opportunity to buy Array Technologies stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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The post Array Technologies Is Hard to Resist, but Waiting Is the Right Thing to Do appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.