Generac Stock Eyes Worst Day Ever on Preliminary Q3 Results

Options volume is today running at six times the intraday average

Digital Content Manager
Oct 19, 2022 at 2:37 PM
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Generac Holdings Inc (NYSE:GNRC) is sinking this afternoon, last seen down 25.1% to trade at $110.67, after the company's preliminary third-quarter earnings and revenue came in well below Wall Street's expectations. The manufacturing concern also cuts its fiscal year net sales growth forecast to range between 22% and 24%. Plus, a large costumer has ceased operations and filed for bankruptcy protection, hurting its clean energy product shipments.

In response, Keybanc downgraded the stock to "sector weight" from "overweight." Still, 20 if the 24 analysts in coverage call GNRC a "buy" or better, while the 12-month consensus target price of $304.60 is a 174.6% premium to current levels. This suggests more downgrades or price-target cuts may be on the horizon.

While short sellers have been hitting the exits lately, they still have the upper hand. The 5.44 million shares sold short make up 8.8% of the security's available float, or almost one week's worth of pent-up buying power.

Options traders are blasting the security today, with 16,000 calls and 18,000 puts traded so far, which is six times the volume that is usually seen at this point. Most popular is the November 90 put, followed by the October 105 put, with positions being opened at both.

This denotes a shift in sentiment, given the options pits have been extremely bullish in the last 10 weeks. This is per Generac stock's 50-day put/call volume ratio of 3.08 over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 99% of reading from the last 12 months.

It's also worth noting the security's Schaeffer's Volatility Scorecard (SVS) ranks at 93 out of 100. In other words, GNRC has exceeded option traders' volatility expectations in the last year.

Should these losses hold, Generac stock will mark its lowest close in just over two years. The shares have been trading firmly below the 20-day moving average since August, and are pacing for their worst single-day percentage loss in history. Year-to-date, GNRC is down 68.6%.


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