What happened
The weight of last week's big gains continues to work against shares of power storage and generator company Generac Holdings (GNRC 6.78%). The stock is down another 7.3% as of 12:25 p.m. ET Tuesday following downgrades and lowered price targets from another handful of Wall Street firms.
So what
By most measures, the company dished out solid fourth-quarter numbers last Wednesday. While sales were down 2% year over year, operating earnings of $1.78 per share were better than analysts were expecting. The company believes revenue will continue declining through 2023, but adds that "operating and free cash flow generation is expected to return to strong levels for the full year." It was enough to push the stock firmly higher early last week.
Now that gain is prompting second thoughts from the analyst community.
NYSE: GNRC
Key Data Points
Analysts with Truist are among these new doubters. The bank's research arm downgraded Generac Holdings' stock to a hold today, suggesting economic headwinds like higher interest rates could stymie this year's results.
It's not just Truist, though. Janney dialed back its call from a buy to a hold as well, lowering its price target from $158 per share to $137. Stephens & Co. isn't changing its overall buy/sell stance on Generac, maintaining its overweight rating. It is lowering its price target, though, from $150 to $125 per share.
These moves follow Wells Fargo's decision to downgrade Generac Holdings to equal-weight on Friday of last week, suggesting the company's 2023 guidance is simply too optimistic.
It's just too much headwind to overcome.
Now what
It's a concerning wave of doubt, to be sure. But this wave of pessimism shouldn't necessarily deter long-term investors from stepping into this stock while it's beaten down.
There's no denying this year could be a tough one, for the very reasons Wells Fargo and Truist fear. What's arguably not being considered, however, is how these transient challenges may already be priced into this stock, and then some. Generac shares are currently trading more than 70% below their 2021 high, in anticipation of the economic headwinds now blowing.
Yet the company's business -- self-sufficient power generation and energy storage -- are a key part of the energy industry's future. Indeed, even the same analyst community that's undermining Generac shares today is still calling for sales growth of 10% next year, paired with per-share earnings growth of 20%. Today's weakness is a chance to plug into a bigger-picture rebound effort that got going back in December, and is still well intact.
