Generac Holdings Inc. GNRC designs and manufactures standby generators, portable generators, lighting, outdoor power equipment and a range of clean energy products.
The analysts: Goldman Sachs GS analyst Jerry Revich maintained a buy rating on Generac.
Revich lowered its price target to $346 per share from $406 per share to reflect the impact of rising interest rates on valuations.
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The central theses
- Analysts at Goldman expect the backlog to bottom within three months, while search trends have supported the prospect of a 30% peak, resulting in a bottom in generator demand.
- With Generac’s current stock price trading at around $139.01 per share, the new iteration would allow investors to earn a yield of over 140%.
- Revich’s third-quarter 2022 EBITDA estimate is 5% below FactSet consensus.
- 2022 EBITDA is expected to be 1% below consensus, with a corresponding revenue estimate, while 2023 EBITDA estimate is 17% below consensus, with a 7% lower revenue estimate.
Infrastructure spending orders have grown over 44% since March 2022, pointing to more public works activity over the next nine to 12 months.
There’s an increasing risk of equipment oversupply as there’s been a tug-of-war between rising prices and falling input costs due to inflation, Revich says.
With natural disasters like Hurricane Ian crippling power grids, demand for generators should remain stable over the long term.
Generac entered the portable battery market with the Generac GB1000 and GB2000 portable power stations, which offer the benefits of clean, emission-free AC or DC power delivery at the push of a button.
Additionally, on Oct. 4, Generac acquired Blue Pillar, a platform developer for the Industrial Internet of Things (IoT). undisclosed financial terms.
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