Generac ( NYSE: GNRC ) on Tuesday advanced as much as 6% after analysts at Janney rated the maker of backup generators and solar products as a Buy. They said Generac ( GNRC ) is an established brand that is trading at a discount to its industrial peers and has the potential to expand its clean-energy business.
“Despite near-term headwinds, the core business exhibits secular growth trends,” Sean Milligan, analyst at Janney, said in a Dec. 28 report. “Having spent a total of $902 million on 13 acquisitions since 2019, Generac ( GNRC ) now has a roadmap to deliver a complete suite of residential solar and storage products to the market.”
Those products include batteries and smart-home devices. Generac ( GNRC ) next year plans to start selling microinverters, which convert direct electrical current from solar energy into alternating current to power home appliances, as part of its offering.
Distributors of residential backup generators now have higher-than-average inventory levels that are likely to dampen revenue for Generac ( GNRC ) in the first half of 2023. The company has forecast improvements by the second half of the year.
The stock’s current price may indicate that investors aren’t assigning any value to the potential growth in its clean-energy business. Price-to-EBITDA multiples for Generac ( GNRC ) are compressed compared with industrial and clean-energy peers, according to Janney.
Janney estimated the fair value for Generac’s ( GNRC ) stock is $160 a share based on a combination of comparable companies and discounted cash flow analysis.
Generac ( GNRC ) this year declined 75% through the close of regular trading on Dec. 27, compared with a 20% slide for the Standard & Poor's 500 stock index ( SP500 ).
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Generac rises as Janney starts research coverage with Buy rating