Financial firm B. Riley became increasingly confident that the boating industry will stay resilient during the covid-19 outbreak, and that boat demand will remain strong.
Analyst Eric Wold raised price targets for all of the companies in the group — Brunswick Corp., MarineMax, MasterCraft, Malibu and Marine Products Corp., maker of Chaparral and Robalo.
He also upgraded Malibu Boats from a Neutral rating to a Buy rating. Wold had downgraded Malibu and MasterCraft to Neutral last month, anticipating the reverberating effects from widespread shutdowns.
“With checks indicating that retail demand has been strengthening week-to-week into the Memorial Day holiday weekend and an expectation that this summer will represent a significant improvement over last year, we are raising our target multiples and price targets for the majority of the group — and upgrading MasterCraft from Neutral to Buy,” wrote Wold in a report.
Manufacturers have made “significant progress” in reducing elevated dealer inventories after a slower-than-expected start to the selling season, said Wold.
“Nevertheless, we understand the 50 to 75 percent production losses during [the second quarter of 2020] after manufacturing facilities were closed in late March are having an incrementally positive impact on dealer inventories — with most of the production in the initial weeks geared toward filing orders for already-purchased boats (as opposed to merely adding to stock inventory levels),” wrote Wold.