Generac Holdings technical outlook: is selling now overdone?

Generac Holdings Inc. (NYSE:GNRC) was at the centre of accelerated selloffs on Wednesday. The stock crashed by 14% in premarket after news of disappointing preliminary third-quarter results and guidance.

Generac is an energy tech solutions entity. The company offers power grid software, backup, and prime power systems. It was not all rosy for the company in the third quarter. In its preliminary results, Generac said that its net sales improved by 15% from the prior year to $1.09 billion or £0.97 billion in the quarter. However, the company booked a lower net income of $58 million or £51.8 million. The net income for the prior year’s quarter was $132 million or £117.9 million.

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The company’s guidance was disappointing too. The expected FY22 sales growth is expected to be between 22% to 24%, lower than the previously guided 36% to 40%. The net income margin is expected at between 9% to 10.0% in FY22. That’s lower than previously guided 13.0% to 14.0%. 

Generac’s downgraded guidance reflects challenges in the operating environment. For example, the company noted the loss of large customers who ceased operations and are currently under bankruptcy protection. The recent woes add pressure to the stock, which is now down more than 57% year-to-date.

Generac Holdings heading to $100?

A technical outlook shows Generac stock on strong bearish momentum. The RSI reading of 34 suggests that the stock is nearly at oversold levels. However, the stock is yet to find suitable support, an advantage to the sellers to take it further lower. 

Should you buy Generac?

Investing in Generac stock now seems like catching a falling knife. The stock’s bearish momentum could increase further as investors digest the preliminary quarter results. Despite the considerable fall in the year, sellers are not overdone, given the uncertain macro landscape.

A possible bottom for Generac stock lies between $80 and $112. On a balance of probabilities, the stock will likely crash below $100, a level where a bullish momentum all started in 2020.