Short Trade Idea
Enter your short position between $150.67 (a minor horizontal support level) and $161.26 (yesterday’s intra-day high).
Market Index Analysis
- Generac Holdings (GNRC) is a member of the S&P 500 Index.
- This index hovers near record highs amid an expanding AI bubble, but lacks market breadth, as bearish catalysts accumulate.
- The Bull Bear Power Indicator of the S&P 500 shows a negative divergence and does not support the uptrend.
Market Sentiment Analysis
Equity futures are moderately lower this morning. Super Micro Computer shares tanked, Qualcomm and Robinhood moved lower, joining a chorus of massively overvalued stocks that corrected after their earnings. E.l.f. Beauty reminded markets that tariffs have an impact, plunging 20%+, and yesterday’s ADP report showed no job creation in small companies with fewer than 250 employees, which traditionally account for 75% of all jobs. Warner Bros. Discovery, Airbnb, and Moderna highlight today’s earnings reports, followed by the Tesla shareholder meeting.
Generac Holdings Fundamental Analysis
Generac Holdings is a Fortune 1000 American manufacturer of residential, light commercial, and industrial power systems with outputs ranging from 800 watts to 9 megawatts.
So, why am I bearish on GNRC following its earnings miss?
Expectations called for revenue of $1.19 billion and earnings per share of $2.20, but GNRC reported revenue of $1.11 billion, down 5% year over year, and earnings per share of $1.83. I consider Generac Holdings’ role in data center backup generators to be overly optimistic. Contracting profit margins are another area of concern, and I am bearish on its latest product line.
Generac Holdings Fundamental Analysis Snapshot
The price-to-earnings (P/E) ratio of 30.38 makes GNRC an expensive stock. By comparison, the P/E ratio for the S&P 500 is 30.43.
The average analyst price target for GNRC is $207.47. It suggests excellent upside potential, but downside risks outweigh it.
Generac Holdings Technical Analysis
Today’s GNRC Signal
GNRC Price Chart
- The GNRC D1 chart shows a price below its horizontal resistance zone.
- It also shows price action breaking down below its ascending Fibonacci Retracement Fan.
- The Bull Bear Power Indicator is bearish with a descending trendline.
- The average bearish trading volumes are higher than the average bullish trading volumes.
- GNRC corrected as S&P 500 Index advanced, a significant bearish trading signal.
My Call
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I am taking a short position in GNRC between $150.67 and $161.26. GNRC spends more capital to maintain a stagnant market position, profit margins are shrinking, and it trails competitors in data center backup generators.
- GNRC Entry Level: Between $150.67 and $161.26
- GNRC Take Profit: Between $99.50 and $118.09
- GNRC Stop Loss: Between $171.51 and $180.32
- Risk/Reward Ratio: 2.46
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