In a short report about Generac Holdings Inc. GNRC which was released in June Spruce Point Capital Management According to speculation, the company could be overvalued.
Generac is a popular stock and has proven to be a top performer over the past 10 years, with returns of more than 1,000% over that period.
Spruce Point claimed in its research that Generac’s latest takeover craze was the result of the company trying to bail out of problems in its core generator business.
On today’s conference call from Generac, CEO Aaron Jagdfeld may have alluded to the shift away from its core generator business, saying, “Home-standby generator installation capacity has continued to grow but still lagged behind our manufacturing output in the third quarter,” possibly confirming what Spruce Point said proclaimed in June.
Spruce Point also said Generac invests in unproven and highly speculative clean energy products and services, which increases risk for investors.
The company also listed a target valuation range for Generac of $110 to $132 per share in its June report.
What happened: Generac shares trade 22% lower to around $114 on Wednesday after the company reported preliminary third-quarter EPS results that are lower year-on-year. The company also lowered its guidance for FY22 net sales growth and net profit margin.
For 2022, the company lowered its revenue growth guidance to 22% to 24% from 36% to 40% and its guidance for net income margin to 9% to 10% from 13% to 14%.
Spruce Point said in its report it found evidence of a “sham revenue transaction” by Off-Grid Energya recent Generac acquisition.
The short report also claimed to have been linked to Generac pink energywhich Spruce Point believes is under investigation by the FTC for “deceptive customers” and that Generac was involved in a “shady” transaction with the solar energy company Sunnova Energy International Inc NOVA.
Why it…
