Analyst: Generac Stock's Risk Reward May Skew to Downside

The brokerage also slashed its price target to $91

Digital Content Manager
Mar 31, 2023 at 10:49 AM
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Generac Holdings Inc. (NYSE:GNRC) stock was last seen down 6.1% at $105.14, after BofA Global Research downgraded it to "underperform" from "neutral," and also slashed its price objective to $91 from $141. The brokerage said the company could see weaker-than-expected residential sales, and flagged the risk of a substantially worse macro backdrop that skews the risk reward to the downside.

Overall options volume is running at five times the intraday average, with 2,586 calls and 894 puts exchanged so far. Most popular is the April 115-strike call, followed by the 105-strike call in the same monthly series, with new positions currently being opened at both.

Short-term options traders lean firmly bearish, however. This is per GNRC's Schaeffer's put/call open interest ratio (SOIR) of 1, which sits higher than 90% of readings from the last 12 months. 

Now could be a good time to weigh in with options, as the equity's Schaeffer's Volatility Scorecard (SVS) ranks at 87 out of 100. This indicates Generac stock tends to exceed options traders' volatility expectations -- a good thing for buyers.

Though short interest is down 16.1% in the last two reporting periods, short sellers are still in control. The 5.30 million shares sold short make up 8.8% of the equity's available float.

The security is today trading at its lowest level since January, after yesterday's rally failed at a ceiling at the $116 level. The 20-day moving average has been pressuring shares lower since earlier this month, and year-over-year they carry a 64.6% deficit. 


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