Sporting equipment company Bombardier Recreational Products is the best bet in the outdoor powersports space, according to Citi. Analyst James Hardiman upgraded the stock to buy from neutral on Tuesday and raised his price target by $17 to $128. The firm's new target suggests shares stand to gain nearly 28% from Monday's closing price of about $100. Shares of the company, which produces ATVs and Sea-Doo snowmobiles and personal watercraft, have dropped 8.7% this quarter, and are down more than 1% so far this year. Hardiman also opened a pair trade due to the sizeable valuation premium accorded to auto manufacturer competitor Polaris , saying "we would not only expect BRP to outgrow Polaris going forward, but we would also expect this valuation delta to close over time." Shares of Polaris are trading 6% higher this year, but the stock has similarly faced steep losses this quarter of about 11.5%. Hardiman lowered his price target on the stock to $110, implying 3.2% upside from its latest close. "We are significantly more comfortable with DOO's inventory strategy, as the company continues to chase demand, as opposed to a much more aggressive stance taken by Polaris, who appears to be punting the $750M replenishment headwind into 2024," Hardiman said in a note. The analyst said that based on the firm's conversations with off-road recreational vehicle dealers, he estimates that Polaris' third-quarter sales in North America have slowed meaningfully from the company's estimates. The firm views BRP as a more reliable play. "We conducted a deep dive on powersports inventories, and after taking their medicine in the second half of this year, BRP is well positioned to go after its FY25 targets, despite broad investor skepticism/disbelief," Hardiman said. — CNBC's Michael Bloom contributed to this report.
