Generac (GNRC) Pops as Cowen Initiates Coverage at Outperform, Sees Attractive Valuation

September 30, 2022 8:50 AM EDT
Get Alerts GNRC Hot Sheet
Price: $100.70 -2.32%

Rating Summary:
    20 Buy, 5 Hold, 4 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 2 | Down: 23 | New: 24
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Shares of Generac Holdings (NYSE: GRNC) are up almost 2% in pre-open Friday trading after Cowen analyst Jeffrey Osborne initiated research coverage with an Outperform rating and a $229 per share price target.

Generac, which manufactures backup power generation products for residential, light commercial, and industrial markets, is described as a market leader in the Home Standby Generator (HSB) market.

“Generac is the clear industry leader within a market that still has growth potential given its ~5.5% penetration rate. The instability of the grid continues to drive significant power outages across the US during periods of extreme weather. We believe the clear need for incremental grid investment and hardening has increased baseline demand for Generac’s products,” Osborne told clients in an initiation note.

The analyst also weighed in positively on Generac’s acquisition of Chilicon last year, which has “drastically increased its addressable residential solar market.” However, capturing market share in the solar market “will take time,” Osborne warned.

Finally, the new Outperform rating is a result of an “attractive” valuation as shares trade at ~13.5x NTM P/E.

“We see the stock as fairly valued between $225-250 until there is clarity on backlog roll off and steady-state HSB trends and/or meaningful progress in adjacent industries. We see a sub $225 share price as fully pricing in a slowing growth environment for a category leader with secular tailwinds. There is a clear disconnect in Generac’s 2023 growth expectations amongst its sell-side coverage, as well as current consensus and buy-side expectations,” Osborne concluded.

By Senad Karaahmetovic

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