Generac's 2023 Guidance is too Aggressive According to Wells Fargo

Wells Fargo believes that Generac is starting to overestimate its prospects for the future, based on its current valuation.

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According to Praneeth Satish, analyst at RBC Dominion Securities, the company's stock has been downgraded from overweight to equal, noting the company would likely miss its aggressive guidance for 2023. He reiterated his target price of $135, which would mean only a 3.9% upside to Thursday's closing price of $129.91.

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By the end of this year, Generac is expecting its revenue to grow by more than 30%, which Satish says may not be sufficient for the company to handle, due to the steep hill this company faces.

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In a Friday note, the analyst wrote that the proposed growth of EBITDA from Q1 to Q4 would be more than threefold. Overall, this seems aggressive to us, especially in light of the limited visibility into installation capacity growth and the clean energy challenges that the market faces.

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In its base case, Wells Fargo forecasts revenue declines 12% in 2023 and grows 11% in 2024, assuming a moderate growth rate.

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Satish pointed out, however, that Generac's shares could rise by more than 30% if it achieves its 2023 guidance.

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In Wednesday's earnings report, the company beat expectations.

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In the premarket on Friday, the stock decreased 2% for the day. Since the beginning of 2023, stocks have surged 29%.