Freedom Broker Turns Bullish on Argan (AGX) After Record Quarter

On September 2, Argan, Inc. (NYSE:AGX) reported record financial results for its second quarter of fiscal year 2027. The company's revenue reached a record $384 million, with a gross margin of 19.3%, and a net income of $53 million. Adjusted EBITDA also hit a record $70 million. In response, Freedom Broker upgraded its rating on Argan, Inc. from Hold to Buy, with a price target of $700 per share.

Analyst Sergey Glinyanov attributed the strong performance to the company's execution in major Power projects. Over the last year, Argan, Inc. has seen a 29% revenue growth. The company's project backlog also stands strong at approximately $2.5 billion as of July 31, 2026, down from $2.9 billion a year earlier, but still a substantial base for future growth.

Analyst Sergey Glinyanov expects the company to add more projects in the next 7 to 15 months, potentially benefiting from the ramp-up of gas-fired projects and new contract awards. Despite the strong performance, Argan, Inc. faces some challenges in the near term, as revenue growth may slow in the third quarter of fiscal 2027 due to some revenue being pulled forward into the second quarter.

Additionally, the Industrial segment has been a concern, with a gross margin falling to 7.3% in the second quarter, down from expectations, due to cost overruns on unrelated projects. Management expects these projects to be completed within the next six months, limiting the impact on profitability. Hedge fund interest in Argan, Inc. decreased slightly in the second quarter of 2026, with 39 funds holding positions in the stock, down from 42 funds in the first quarter.

However, Argan, Inc.'s stock remains below its 52-week high of $805.75 and above its 52-week low of $197, indicating strong investor interest. While acknowledging the potential of Argan, Inc. as an investment, the author believes there are other AI stocks with greater upside potential and less downside risk.