The second half of 2023 was the end of the solar energy party. After several years of solid growth, boosted by the initial effects of legislation -- like the U.S. Inflation Reduction Act (IRA) -- aimed at boosting renewable energy sources, the solar market hit the skids. Higher interest rates (which make financing a bit harder) and an excess supply of various industrial components have sent solar companies into a slump. It's unclear how long this downturn will last. One previous investor darling, Array Technologies (ARRY 1.01%), has been hit particularly hard, and it remains down over 50% from its peak shortly after its late 2020 IPO.

That certainly doesn't mean long-term solar growth is over, though. Indeed, the next round of expansion could be right around the corner. Is it time to buy the dip in select stocks like Array Technologies?

Array Technologies a "pick-and-shovel" play on solar?

Array's specialty is in solar trackers. As the name implies, solar trackers are the base infrastructure that solar panels (or reflectors, mirrors, etc.) are mounted to. They are installed on the ground and equipped with motor drives to continuously orient solar equipment toward the sun as it moves through the sky throughout the day.

This is an essential technology for large-scale utility solar projects, those fields of panels you sometimes see set up in some remote location. This makes Array a type of "pick-and-shovel" play on utility solar power.

Company CEO Kevin Hostetler -- who took the reins in early 2022 shortly after Array acquired its European peer STI Nordland to become the world's largest solar tracker manufacturer -- has cited research that solar is now "the cheapest and fastest form of new energy generation." Array thus thinks it has years of growth ahead of it, especially because the U.S. IRA and other forms of legislation worldwide will be promoting diversification of energy generation away from fossil fuels.

By comparison, companies like Enphase Energy are more of a bet on residential and small commercial space solar energy, with their focus on solar system inverters. Array, still a small-cap stock with a market cap of just $2.5 billion at the end of 2023, could be viewed as part of a diversified basket of solar stocks for investors wanting to bet on the potential growth of the solar market.

Array's time to shine?

There's just one problem facing Array and the solar market in 2024: The sun has set on the industry, and a downturn is now in full swing. Various players in the solar market believe the sun will rise once more and fuel a resumption of their growth, but for now, the sales outlook isn't great.

For Array, that meant a 32% year-over-year decline in revenue to $350 million in Q3 2023. For the full year, management expects sales to fall about 5% from 2022 to $1.55 billion, at the midpoint of guidance.

Despite its fall from peak sales, though, Array is managing to stoke higher profitability from its solar tracker manufacturing operations. This is no doubt getting boosted by the greater scale from integrating STI Nordland since last year, but Array has lots of progress it can still make on this front. Operating profit margin was 11.5% in Q3 2023, calculated according to generally accepted accounting principles (GAAP).

ARRY Operating Margin (Quarterly) Chart

Data by YCharts.

Time to buy the dip in 2024?

Hostetler and the top team at Array have said it's too soon to call a bottom for the solar market, but there could be hope of a new day dawning. The U.S. Federal Reserve recently indicated some interest rate cuts could be coming in 2024. That could make financing big solar projects a bit easier, a welcome relief to Array and the industry overall.

While investors wait for growth to resume, and Array's progress in controlling expenses, the company's balance sheet is one more risk item worth calling out. At the end of September 2023, the company had cash and short-term investments of $174 million on balance, offset by about $660 million in debt.

Nevertheless, if you think solar has a bright future ahead of it, Array could be worth nibbling on right now. Wall Street analyst estimates imply the stock trades for just 12 times 2024 earnings per share, which is contingent on the solar market stabilizing, as well as Array getting into fitter financial shape. At any rate, this stock could be a worthy inclusion in a basket of renewable energy stocks.