Goldman Analysts Forecast 140% Upside On Sustainable Tech Play Generac

Zinger Key Points
  • Jerry Revich maintained a Buy rating on Generac, although lowering its price target from $406 per share to $346 per share.
  • This reiteration falls on the heels of deterioration in the consumer spending outlook.

Generac Holdings Inc. GNRC designs and manufactures standby generators, portable generators, lighting, outdoor power equipment and a suite of clean energy products.

The Analysts: Goldman Sachs GS analyst Jerry Revich maintained a Buy rating on Generac. 

Revich lowered the price target from $406 per share to $346 per share, to reflect the impact of rising rates on valuations.

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Key Takeaways

  • Goldman analysts expect the backlog to bottom within three months, while search trends have been supportive of the view of a 30% peak, leading to a trough in generator demand.
  • With the current stock price of Generac trading around $139.01 per share, the new iteration would allow investors to achieve a return north of 140%.
  • Revich’s third-quarter 2022 EBITDA estimate is 5% below FactSet’s consensus.
  • 2022 EBITDA is expected to be 1% below consensus with an in-line sales estimate, while their 2023 EBITDA estimate is 17% below consensus with a 7% lower sales estimate.

The orders for infrastructure spending have grown by over 44% since March 2022, which points to more public construction over the next nine to 12 months.

There is a rising risk of equipment oversupply, as there has been a tug of war between accelerating prices and slowing input costs from inflation, Revich says.

With natural disasters such as hurricane Ian knocking out power grids, the demand for generators should remain steady over the long-term.

Generac entered the portable battery market with the Generac GB1000 and GB2000 Portable Power Stations which provide the advantages of clean, emission-free AC or DC power output at the push of a button.

Additionally, on Oct. 4, Generac acquired Blue Pillar, an industrial internet of things (IoT) platform developer, for undisclosed financial terms.

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