Shares of Generac Holdings (NYSE:GNRC) declined Friday after research firm BNP Paribas Exane initiated coverage on the stock with an Underperform rating and a price target of $78. The price target implies a decline of about 18%.
Generac has 80% market share of residential home standby generators, and analysts warned of threats to this market from energy storage systems, or ESSs. These products are becoming cheaper and threaten to take some share from generators over time.
“IRA storage tax credits and ambitions product roll-out plans from a long line of innovators have cleared the way from energy storage (ESS) to take some share from generators,” said analysts at BNPP Exane.
The analysts added, “While there are sustained benefits from generators which we don’t expect ESS can compete against (true multi-day backup), we see tech roadmap + cost declines + commissioning time + IRA credits driving whole-home ESS backup 30% cheaper than a generator by 2026. The trade-off between price (ESS) & multi-day (HSB) will ultimately attract some away from HSB, with even greater capture as ESS specs improve throughout the decade.”
Shares of Generac declined 4% shortly after the research note was published. So far this year shares are lower by 7%.