Generac stock powers higher

Mike Zaccardi, CFA, CMT

Generac’s CEO was on CNBC this past Friday. Aaron Jagdfeld described how Isaias was the perfect storm for the at-home power generator manufacturing company. Think about it – a sprawling tropical storm traversed a highly-populated area with above-ground power distribution and a whole lot of trees.

Then consider the current economy – Work. From. Home.

People need reliable power to do business. Gone are the days (hopefully temporarily so) of backup generators powering office buildings during intermittent outages. Now, all of us white-collar workers depend on at-home Wi-Fi and (often) personal laptops at our 9-to-5 jobs.

Generac must be loving this setup. The stock has soared from $75 in March to $180 today. It’s at an all-time high. Bank of America made news for the stock recently with an upgrade and a price target of a ‘cool’ $200.

Don’t put too much faith in sellside estimates though. Analysts are known to suffer from ‘conservatism bias’ – which means they are slow to update their views to new information. Analysts tend to just follow price. In this case, the storm rocked the Mid-Atlantic and Northeast with 80mph gusts and flooding rains. Investors bought the stock in droves, and THEN analysts turned more bullish. Analysts were a little late to the game – it’s the normal cadence. That’s a little free trade-school for everyone reading.

In other company news coincidentally, GNRC introduced a new generator to its Guardian series of at-home standby generators. The company said the more efficient product should yield $8,000 of savings on purchase & installation. Maybe that spurred some bullish price-action, too.

Investors and market-watchers should be aware that hurricane season and the time right before wintertime are the best periods of the year for Generac stock. This is by no means a recommendation, simply a look at history. Over the last 9 years, the stock has done nothing from January to early June, but has then roared from mid-August to Christmas, when analyzing seasonal trends.

A lot has been baked into the stock price of Generac. It’s impossible to say how much juice is left, but the company appears to be a major beneficiary of COVID-19’s impacts and an active hurricane season. 

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Chart used with permission from Tradingview.com