Generac: Transitioning to Data Center–Driven Growth Creates Compelling Upside Despite Near-Term Residential Softness

Analyst Dimple Gosai of Bank of America Securities reiterated a Buy rating on Generac Holdings, reducing the price target to $224.00.

Dimple Gosai has given his Buy rating due to a combination of factors that highlight both near-term resilience and long-term structural growth for Generac. He views the current softness in North American residential standby demand as primarily tied to unusually low outage activity rather than a fundamental deterioration in consumer appetite, noting that sales conversion trends are holding up better than feared. At the same time, Generac’s strategic shift toward data centers is gaining real traction, with a rapidly expanding large-megawatt order backlog supported by firm purchase orders and milestone-based payments that lower the risk of cancellations. Gosai also interprets the planned capacity expansion at the Sussex facility as management’s strong conviction in executing on expected hyperscale demand in 2027–2028.

Despite modeling some near-term earnings pressure versus consensus for 2025, Gosai expects a meaningful acceleration in 2026, underpinned by double-digit revenue growth, stronger commercial and industrial performance, and margin recovery from improved mix and operating leverage. He emphasizes that Generac is transitioning from a business overly dependent on weather-driven outages to a more diversified power solutions platform with durable data center exposure. Against this backdrop, he sees the current valuation—trading at a notable discount to both peers and its own historical averages on forward EV/EBITDA—as compelling relative to the company’s long-term growth and margin potential. These dynamics collectively support his Buy rating and a price objective that implies significant upside from the current share price.