Citi just upgraded Bombardier to “Buy”

Citi analyst James Hardiman upgraded his rating on Bombardier Recreational Products (BRP Stock Quote, Chart, News, Analysts, Financials TSX:DOO) to “Buy” from “Neutral” and raised his target price to $102 .00 from $93.00 in a September 30 report, citing accelerating retail momentum and upcoming product catalysts.

The average target on the Street is $100.60.

“Based on our most recent round of (off-road vehicle) dealer checks, we estimate that ORV retail was up low-doubles for PII and up mid-singles for BRP over the past three months,” he said. “In both cases, aggressive promotions stimulated demand, while year-over-year comparisons meaningfully helped September (but will likely hurt October).”

While Hardiman acknowledged that BRP’s rebound “may be not as dramatic as what we have seen from PII,” he called the uptick “meaningful” and “perhaps more durable,” given that it has required less promotional support. He expects the company’s Oct. 8 analyst day in Valcourt, Que. to provide “a directional update of retail demand trends and a heavy dose of excitement around new products,” with the redesigned Can-Am Defender HD11 likely to feature prominently.

“Although we would not expect to hear explicit long-term earnings targets (as the company has yet to announce who will succeed outgoing CEO Jose Boisjoli), there will likely be enough breadcrumbs in the form of market share and margin opportunities for investors to stitch together a compelling valuation outlook,” he said.

As reported by the Globe and Mail, Hardiman argued that BRP shares are well-positioned to benefit from easier year-over-year comparisons, improving industry inventory alignment, and a bigger lift from new product introductions.

“The new Defender will clearly be a focus of the upcoming analyst day, and could prove to be the tip of the spear with respect to BRP clawing back market share over the next 12+ months,” he said.

He also upgraded Polaris (Polaris Stock Quote, Chart, News, Analysts, Financials NYSE:PII) to “Neutral” from “Sell” and raised his price target to US$60 from US$35, above the US$49.67 average, noting that stronger third-quarter retail trends are likely to outweigh tariff concerns in the near term.

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