Last month, Finbold provided valuable insights into the top 10 stock holdings of the legendary investor and fund manager, Michael Burry.
Among his portfolio holdings was Generac Holdings (NYSE: GNRC), a US-based manufacturer of backup power generation products, accounting for approximately 0.5% of his total investments.
However, in the past month, GNRC suffered a significant setback, with its stock value plummeting by nearly 20%, pushing its market capitalization down to $5.66 billion as of October 20.
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Today, we analyze GNRC’s current situation to help investors determine whether the stock presents an attractive buying opportunity or should be approached with caution.
GNRC enters oversold territory
GNRC embarked on a sharp downward trajectory in August when the company reported worse-than-expected earnings and offered disappointing guidance for the second half of 2023.
Citing the “softer-than-expected consumer environment,” Generac expects net sales to drop between 10% and 12% for the full fiscal year, significantly wider than its previous guidance for a decline of 6% to 10%.
Naturally, the outlook eroded investors’ confidence, prompting a notable sell-off.
However, this decline may have a silver lining, for those willing to look from another perspective. Notably, recent share price losses have tipped GNRC into oversold territory, hitting a relative strength index (RSI) of around 24.
For comparison, the current RSI reading of the S&P 500 ETF (SPY) is 45.1. For that reason, stock market bulls may interpret the current GNRC’s RSI as a sign that the recent heavy sell-off may be nearing exhaustion, and start to look for entry point opportunities on the buy side.
On the other hand, there are some areas for concern. For instance, Generac’s Return on Equity (ROE) currently sits at around 8%, which is significantly lower than the industry average of 16%.
Wall Street’s view
Taking into account the factors mentioned earlier, there are compelling arguments to be made both for an optimistic outlook and a pessimistic one concerning GNRC.
Meanwhile, Wall Street’s view of the stock remains largely bullish. The average 12-month price target on the GNRC currently sits at $139, based on coverages of 22 analysts in the past three months.
This price objective implies a possible upside of more than 54%.
During that 3-month period, 13 experts rated the stock as a ‘Buy,’ 7 advised a ‘Hold’ and just 2 think it is a ‘Sell.’
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
