Why is Generac Stock so Hot This Year?
Generac Holdings Inc (GNRC) is expected to release an earnings report on November 2nd that shows year-over-year earnings of 18.8%. Quarterly earnings on the stock are estimated at $2.47 per share. YTD market performance is at 120.97%, as of Friday, October 29th. Those are big numbers. How are they doing it, and will the uptrend continue?
For those unfamiliar with the company, Generac is a leading provider of backup generators for homes. They’ve been around since 1959 and have built a business in this niche where seven of every ten homeowners who buy home backup generators are purchasing them from Generac. That’s a 70% market share, a huge number in any industry, almost a monopoly.
On April 3, 2020, Generac share prices were at $84.66. They opened this morning at $500. Rebound growth was a common story last year, but Generac wasn’t rebounding. They peaked at $112 in March. The growth after the April bottom was a steady and meteoric rise to where they’re at today. Clearly, they’re doing something right over there.
Generac Revenue Growth May Be Linked to New Home Sales
My esteemed colleague Gary Black, who runs The Future Fund (FFND), told Business Insider last week that he added Generac to their ETF because he believes worsening climate change will drive generator sales going forward. I’ve followed Gary for years and consider him a savvy investor, but I disagree with him in this case. Home sales are driving revenue for Generac.
The 2020 pandemic, combined with historically low interest rates, caused a mass exodus from concentrated population centers. In other words, the city folk who could afford it all moved to the suburbs. According to US News, home sales hit a 14-year high in 2020. Last month alone (9/2021) they jumped 14%. Those numbers correspond with Generac’s share price growth.
New homeowners are a sweet spot for reps who sell home backup generators. They’re also a fertile hunting ground for renewable energy providers. The team at Generac recognizes that and has been steadily growing their footprint in the solar + battery storage solutions market. Their focus is on sustainable clean energy and they’re now a certified ESG investment.
Renewable Energy Stocks to Watch in Q4
Sticking with the residential theme, my first pick in the renewable category for Q4 is SunPower Corp (SPWR). A manufacturer of solar panels for homes and commercial buildings, SunPower reported Q2 revenue growth of 41.9% and a net income increase of 34.5% YOY at the end of July 2021. Their stock is up 32.71% YTD and has been in uptrend since September 20th.
Once again, those numbers seem to correspond with the September spike in new home sales. Just for kicks, I also checked the numbers on ReneSola Ltd (SOL), another manufacturer of residential solar panels. They’re up 41.68% in the past thirty days after reporting a 125% increase in YOY net income attributable to shareholders.
My final recommendation in this category is ChargePoint Holdings Inc (CHPT). The leader in home EV charging stations is up 20.80% over the past thirty days and 81% for the past twelve months. Expect that number to jump significantly if Congress ever gets the infrastructure bill done. Even if they don’t, CHPT is a solid add to your portfolio.