Time to Plug Into Generac After It Generates Big Deal With Amazon?
Here’s my take on the agreement that could see $8 billion in generators going to Amazon.
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The news broke Wednesday evening. It was disclosed, in a regulatory filing, that earlier that day Generac Holdings (GNRC) and Amazon (AMZN) had entered into a agreement. The gist of the deal? Amazon has agreed to buy up to $8 billion worth of generators from Generac to back-up power its data centers in support of its AI computing efforts. In exchange, Amazon gets the right to buy a stake in Generac (1.69 million shares) at a set price per share of $200.93. Roughly 308,000 of those shares changed hands immediately. The rest will be unlocked over time as Amazon pays Generac for those generators up to the $8 billion total.
The first tranche of deliveries ($2.4 billion) is expected to ship through calendar years 2027 and 2028. Amazon has until Sept. 16, 2033, to exercise its right to fully complete the deal. Should Amazon opt to exercise it in its entirety, Amazon’s stake in Generac would be worth roughly $340 million at today’s prices.
GNRC closed last night at $175.11.
Wall Street’s Take
Most notably, analyst George Gianarikas of Canaccord Genuity reiterated his “overweight” rating (which is a buy-equivalent) on GNRC while increasing his target price from $275 to $375. Gianarikas referred to this agreement as the company’s most important data center data disclosure since its first hyperscaler win. He also claims that this directly addresses the 2028 backlog replenishment debate that had become central to the stock’s investment story. Gianarikas is not highly rated on Wall Street, so consider that as you consider his note. He is rated at less than half of one star out of five stars by TipRanks. Over the past two years, he has compiled a success rate of only 35% while generating an average return of -4.8%.
Looking at analysts who have exhibited a little more success of late, Stephen Gengaro (rated five stars) of Stifel Nicolaus and Brian Drab (also five stars) of William Blair both reiterated “buy” or buy-equivalent ratings. Drab, who has put together a 64% success rate and a 33.55 average return over two years did not set a target price. Gengaro reiterated his $285 target. He has compiled a 58% success rate over two years while generating a 21.5% average return.
The Chart
Readers will see here that the shares of GNRC have more or less colored by the numbers without too much variation. The shares sold off hard over the summer coming off of that Double Top pattern of bearish reversal. From August into September, GNRC developed a Falling Wedge pattern of bullish reversal that with today’s news-inspired boost, has fired on all cylinders.
In doing so, the stock has taken back its 21-day exponential moving average, 50-day simple moving average and 200-day simple moving average. The 21-day line acts as a catalyst for swing traders while the other two lines are forcing professional managers to increase exposure as we speak. What will be interesting into the weekend, will be to see if the stock can hold either the 200-day SMA or 50-day SMA. I would think that chasing this rally might be a costly affair for traders more so than investors. Personally, I would not mind trying to make an initial purchase below that 200-day line but above the 50-day line. Instinct tells me that the pros might not defend the red line, but very well may defend that blue line.
At the time of publication, Guilfoyle was long AMZN equity.
