Analyst: Sell This Stock Ahead Of California Gas Mower Ban

California recently announced a ban on all gasoline-powered mowers and lawn equipment starting in 2024, a decision that triggered an analyst downgrade for Toro Co TTC on Wednesday.

The Toro Analyst: Bank of America analyst Ross Gilardi downgraded Toro from Neutral to Underperform and cut his price target from $118 to $85.

Related Link: What California's Gas-Powered Mower Ban Means For Toro, Stanley Black & Decker

The Toro Takeaways: In the downgrade note, Gilardi said both the California ban and a shortage of lawn mower engines are reasons to dump Toro.

Toro is making progress on its Flex-Force cordless products, and Techtronic Industries Co. Ltd. TTNDY will also be hitting the market with new cordless electric mowers and snow throwers in 2022, the analyst said. Techtronic already has a large and growing presence at Walmart Inc WMT stores, he said. 

“We’re concerned that the big retailers may begin pulling gas powered mowers off the shelf with a California ban looming in 2024.” 

At the same time, Gilardi said component shortages will likely result in negative comps for Toro in the first half of 2022. He said investors don’t seem to fully appreciate the severity of the engine shortages. Bank of America is projecting just 3.9% sales growth and a 1.9% drop in net income for Toro in 2022.

Finally, mower demand from golf courses has been strong for the past two years, but Gilardi said rounds played have been decelerating for four consecutive months as players are getting diverted back to other leisure activities now that the economy is opening back up.

TTC Price Action: Toro shares were down 4.96% at $94.70 midday Wednesday. 

Benzinga’s Take: California may have been the first state to ban gas-powered mowers, but it likely won’t be the last. The window of opportunity for Toro to make the transition to all-electric products appears to be closing, so the company and its investors have a lot riding on the next several quarters.