Mastercraft Boat Rides Upgrade After Analyst Is 'Increasingly Confident' Demand Is Intact

The COVID-19 pandemic's impact on the boating market may have been overstated as recent checks point to strengthening week-to-week demand and Mastercraft Boat Holdings Inc MCFT should see a strong summer selling period, according to B. Riley FBR.

The Mastercraft Boat Holdings Analyst

Eric World upgraded MasterCraft Boat's stock from Neutral to Buy with a price target lifted from $10 to $16.

The Mastercraft Boat Holdings Thesis

Statistical Surveys (SSI) data related to new boat registrations for April will be released on Wednesday and should show another month of declines, World said. Channel checks will show warmer weather states saw a rebound in demand. This should translate to a "significant improvement" in summer sales versus 2019 for MasterCraft Boat, especially from families looking to spend more money at the expense of staying closer to home.

In fact, World said Mastercraft Boat's manufacturing closures should have an incrementally positive impact on dealer inventory levels. Much of the lost production due to COVID-19 related shutdowns were geared towards filing existing orders, rather than merely building stock inventory levels.

Also, manufacturers will benefit from reducing shipments of MY20 boats ahead of the launch of the MY21 boats so they can "keep the inventory fresh."

"We now expect MCFT to head into the summer selling season with a much improved dealer inventory position than we thought even prior to the COVID-19 pandemic arising," the analyst wrote in a note.

Mastercraft Boat's stock is trading at a 30% discount to rivals and despite a 130% rebound from April's low, the stock is still "attractive" at current levels.

MCFT Price Action

Shares of MasterCraft Boat Holdings gained 14% Monday to close at $13.10.