Generac soars 10% amid surging demand for generators as historic Texas snowstorm leads to state-wide blackouts
- Generac soared as much as 10% on Tuesday to record highs amid surging demand for its backup generators.
- The strong demand for residential generators could increase after a historic snowstorm blanketed Texas with snow and led to state-wide blackouts.
- Generac is up nearly 60% year-to-date and revealed a strong order backlog for its products in its earnings report.
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Shares of Generac soared as much as 10% to record highs on Tuesday as a historic snowstorm that blanketed Texas with snow led to state-wide blackouts.
Generac develops, manufactures, and sells power generation and energy storage systems for homes and businesses and revealed in its fourth quarter earnings report that it has seen ongoing strong demand for its products. Shares of Generac are up nearly 60% year-to-date, and are 218% higher over the past year.
Demand for Generac's products could get stronger as the ongoing snowstorm that has impacted more than half the country has increased the allure of a back-up generator for many that have lost power.
Single-digit temperatures in Texas over the weekend caused chaos for the state's energy infrastructure, leading to spikes in both demand and wholesale energy prices. Rolling blackouts were implemented to help prevent the state's energy grid from melting down, and a handful of other states were on watch for potential rolling blackouts.
In a note on Monday, Stifel analyst Stanley Elliott said, "Healthy backlogs suggest additional upside exists barring any supply chain disruptions and particularly in the event of any major storm activity."
Stifel rates Generac as a "hold" and increased its price target to $340 from $213. The firm said Generac's fourth-quarter earnings results, which beat analyst expectations, showed that the firm is successfully shifting its product portfolio into clean energy, "while capitalizing on the tailwinds in the core home standby category."
Generac saw its fourth quarter revenue jump 29% to $761 million, with adjusted EBITDA growing 52% to $196 million. The firm expects 2021 revenue growth of 25% to 30% and continued strong demand from its back-up generator business.
Bank of America is bullish on Generac, according to a client note viewed by Insider. The bank assigned a $382 price target to the company, representing potential upside of 6% from its intra-day high of $360.
"Generac is already sold out on home standby generation, on the back of the pandemic, a record hurricane season, active forest fire season in California, and countless other power outage events in the last 6-12 months," BofA said.
The bank said the blackouts in Texas are "further validation of Generac's business model," according to the note.
"Increasingly, consumers can no longer count on their local utility to provide all of the power they need when they need it," BofA said.
