Piper Sandler, KeyBanc bullish on Generac’s expanding data center pipeline

Investing.com -- Generac Holdings Inc (NYSE: GNRC) shares advanced around 2.5% in early Thursday trading following a pair of bullish Wall Street calls highlighting the company's accelerating expansion into the data center infrastructure market. Piper Sandler initiated coverage on the power equipment maker with an Overweight rating and a $303 price target, while KeyBanc upgraded the stock from Sector Weight to Overweight with a $280 price target.

The twin endorsement from Wall Street underscores a structural shift in Generac’s growth trajectory, driven by surging demand for emergency standby power across data center operators. Analysts emphasized that while the market historically priced Generac as a consumer-facing play tied to residential storm outages, its rapid commercial scaling is shifting investor focus toward high-margin enterprise infrastructure.

Piper Sandler analyst Dimple Gosai noted that Generac has accumulated approximately $4 billion in data center backlog in less than a year, arguing that the market currently undervalues this momentum as a one-time order rather than a multi-year secular shift. The firm estimates that Generac trades at roughly 9.3 times consensus 2028 estimated EV/EBITDA—close to residential peers and nearly six turns below commercial and industrial competitors—despite projecting 2028 revenue and EBITDA of $8.12 billion and $1.62 billion, respectively.

With two major hyperscalers already approving Generac’s product and supply chain, analysts see room for the company to capture additional market share across hyperscale and colocation deployments. Generac’s integrated delivery model, which pairs full unit manufacturing with a single service contract across customer sites, closely mirrors the strategic approach that helped it secure roughly 60% of the U.S. telecom backup power market.

Highlighting the scale of this enterprise transition, KeyBanc analyst Jeffrey Hammond pointed to Generac’s recently announced long-term agreement with Amazon for up to $8 billion over seven years, which includes $2.4 billion through 2028 under a 50% take-or-pay structure. While the key debate among market participants centers on capacity ramping rather than underlying demand, management maintains strong confidence in scaling engine, alternator, and cooling supply chains alongside key partners like Baudouin/Weichai.

Beyond Amazon, management has outlined a strategic path toward $3.0 billion to $3.2 billion in data center revenue by 2028, bolstered by follow-on hyperscaler opportunities tied to 2029 deployments that will require procurement decisions before 2027. The long-term Amazon commitment, paired with warrant incentives, provides the necessary validation to support Generac's ability to compete at scale in large-format generators, according to Hammond.

Meanwhile, Gosai noted that Generac’s legacy residential business provides a durable foundation anchored by long-term structural tailwinds. Low domestic market penetration, with standby units installed in just 6.75% of addressable homes, combines with an aging, wealthy homeownership base and rising power outage frequency to ensure consistent long-term demand.

As commercial operations expand, Gosai expects residential revenue to drop from approximately 75% of EBITDA in 2025 to roughly 50% by 2030. This diversification is projected to insulate earnings from quarterly volatility driven by seasonal storm patterns, offering investors a more balanced and predictable growth profile

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