Wunderlich Upgrades Arctic Cat To Hold, Expects To Benefit From Competitor Shipment Delays

Shares of Arctic Cat Inc (NASDAQ: ACAT) have lost 11 percent since August 15. Wunderlich’s Rommel Dionisio upgraded the rating on the company from Sell to Hold, citing the stock’s recent underperformance and shipment delays at a competitor. The price target has been maintained at $13.

Shipment Delays For Competitor

Polaris Industries Inc. (NYSE: PII), which is among the largest companies in off-road vehicles and a primary competitor for Arctic Cat, has announced shipment delays in its core side-by-side segment. The shipment delays could continue over the next several months and have been caused by a comprehensive product recall and necessary repairs.

“With Polaris’ delayed shipments of new model year 2017 models, this creates a temporary opportunity for Arctic Cat to perhaps gain slight market share in this segment through the remainder of the calendar year,” analyst Dionisio commented.

Competition Concerns

On the downside, that Polaris has also indicated its intention to increase promotional and customer loyalty activity in a bid to protect its massive customer base. Polaris has not provided details of the magnitude and duration of the increased promotional spending.

Dionisio pointed out that in case Polaris continues aggressive promotions for several quarters, it could “hinder Arctic Cat’s ability to gain a more permanent market share in the lucrative side-by-side market.”

The analyst added that Arctic Cat could witness significant challenges in snowmobiles this winter, given the slate of new product launches by industry leader BRP’s Ski-Doo brand.

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