Generac Holdings ( NYSE: GNRC ) on Tuesday was downgraded to Hold from an investment rating of Buy by analysts Truist Securities. They said the maker of backup generators and solar energy equipment faces economic pressures that will prolong its recovery.
“While we see a road to recovery for both HSB [home standby generators] and clean energy,” Jordan Levy, analyst at Truist, said in a report dated February 20, “we believe that near-term macro and market headwinds present heightened downside risk to a second-half 2023 return to growth and could lengthen the recovery period.”
Generac ( GNRC ) increased production of generators after the onset of the pandemic led more homeowners to install backup power systems as they spent more time from home. Truist said large-scale trends such as more frequent power outages, a focus on energy resiliency, working from home and the idea of “home as a sanctuary” are supportive for Generac ( GNRC ) in the longer term.
“We agree in the staying power of these mega-trends as well as the long-term growth outlook for HSB, we see near-term headwinds from higher interest rates coupled with high inflation levels potentially pushing a recovery for HSB into 2024,” according to Truist.
The analysts lowered their price target for Generac ( GNRC ) to $145 a share from $160 a share, based on an enterprise value-to-EBITDA multiple of 12 times estimated 2025 EBITDA of $936 million, along with an 8% risk-weighted discount.
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Generac downgraded to Hold at Truist Securities on economic risks