George Frey
Generac (NYSE:GNRC) experienced a downgrade to a Neutral status from its previous Buy rating by analysts at financial-services firm Guggenheim Securities. This decision was influenced by their apprehension about the maker of home backup generators and solar equipment’s full-year forecast, which indicated a heavier weighting toward the second half of 2024 than anticipated.
Expressing his concerns, Joseph Osha, an analyst at Guggenheim, was quoted in a February 15 report, remarking, “That leaves the company more dependent on a strong second-half performance than we had previously thought. At the same time, the stock has increased by 28% since the beginning of November, as compared to 18% for the S&P 500 (SP500) over the same period.”
Additionally, Guggenheim criticized Generac’s strategy for residential energy technology, citing the need for a shift away from generators running on fossil fuels towards eliminating carbon emissions. While acknowledging Generac’s investments in anticipation of this shift, Guggenheim disagreed with the company’s strategy, labeling it as problematic.
Guggenheim expressed skepticism about Generac’s acquisition of multiple companies to develop a comprehensive home energy technology platform, arguing that this approach is stretching the company too thin. Notably, the strategy encompasses the sale of a wide range of products, from electrical-vehicle chargers to microinverters that convert electricity into a usable form for lighting and appliances.
According to Guggenheim, an area of significant opportunity lies in the development of a battery compatible with various solar-energy systems offered by companies like Sunrun (RUN) and Sunnova (NOVA). They stated, “There is room for another well-executed product, and we think Generac (GNRC) could succeed were the company to focus its efforts sufficiently.”
In light of the rating change, Guggenheim opted to suspend Generac’s price target, previously set at $142 a share.
Generac (GNRC) reported a 1.4% rise in sales from a year earlier to $1.06 billion in the three-month period ended in December.
