Generac Holdings ( NYSE: GNRC ) declined as much as 5.6% on Thursday to a two-week intraday low after analysts at Bank of America downgraded the stock to Neutral from Buy. The bank said channel checks with dealers of backup power generators indicated that order backlogs had eroded, possibly indicating reduced demand.
While dealers in Texas said there’s strong demand for backup generators among homeowners, BofA’s channel checks in the northeastern United States indicated weak orders. Generac’s increased promotional activity with dealers led BofA to reduce its estimates of the company’s gross margins.
The key data point for investors to watch is the Generac’s guidance for 2023, which BofA expects will be part of Generac’s Q4 earnings call.
BofA cut its price target for Generac to $192 a share from $296 by applying a valuation methodology that includes enterprise value-to-EBITDA multiples, a higher discounted cash flow rate and an equity risk premium.
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Generac declines on BofA downgrade as channel checks show weaker backlogs