Barclays cuts Generac stock price target to $188 from $189

On Tuesday, Barclays (LON:BARC) made a slight adjustment to Generac Holdings ’ (NYSE:GNRC) stock price target, reducing it to $188 from the previous $189, while maintaining an Equalweight rating on the shares. The change reflects the analyst’s concerns over the potential impact of tariffs on the company’s financials. With the stock currently trading at $113.43, significantly below analyst targets ranging from $130 to $205, InvestingPro data suggests the stock is currently undervalued based on its Fair Value analysis.

Christine Cho of Barclays highlighted the challenges in assessing the exact financial impact of tariffs on Generac, given the company’s diverse exposure to international markets and raw materials. Generac has significant dealings with China, Canada, and Mexico and relies on foreign-sourced steel and aluminum. The lack of detailed information makes it difficult to determine the precise consequences for the company. According to InvestingPro data, Generac maintains a healthy current ratio of 1.97 and operates with moderate debt levels, suggesting some financial flexibility to navigate potential tariff impacts.

The analyst pointed out that Generac could either be one of the most affected companies within their coverage or possibly see a smaller net impact due to the diversity of its supply chain and other mitigating factors. Cho suggests that the truth likely lies somewhere in between these two extremes.

On the downside, Cho noted that tariffs could compress gross margins and, to a lesser extent, EBITDA margins. There is also a risk that increasing product prices to offset tariffs could dampen demand. However, there may be a silver lining as Generac could experience a surge in demand in the second quarter of 2025. This potential increase would be due to customers rushing to make purchases before the new tariffs take effect.

The analyst’s commentary underscores the complex interplay of factors that companies like Generac must navigate in the face of changing trade policies. It also reflects the ongoing uncertainty in the global trade environment and its potential effects on businesses with international supply chains and market exposure.

In other recent news, Generac Holdings Inc. reported its fourth-quarter earnings for 2024, surpassing analysts’ expectations with an earnings per share (EPS) of $2.80 compared to the forecast of $2.52. The company achieved a 16% increase in net sales year-over-year, reaching $1.23 billion, despite slightly missing revenue expectations. Gross margins hit a high of 38.8%, the highest since 2010, contributing to a strong financial performance. Additionally, BofA Securities reinstated coverage of Generac with a Buy rating and set a price target of $182, highlighting the company’s 75% market share in the backup power market. The firm noted Generac’s potential for growth due to underpenetrated markets like Texas, Florida, and California, which are crucial given the increasing frequency of severe weather events. The company is also expanding its product offerings and manufacturing capacity, which is expected to bolster future performance. Generac’s advancements in smart home energy technology, particularly through its Ecobee products, are also projected to contribute to growth, with Ecobee’s installed base having doubled since 2022. These developments underscore Generac’s strategic positioning in the face of growing demand for reliable power solutions.

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