Why Arctic Cat Shares Skidded
Dec 20th 2012 6:16PM
Updated Dec 20th 2012 6:20PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of snowmobile maker Arctic Cat were catching nothing but ice today, falling 13%, after a downgrade from BMO Capital Markets.
So what: The relevant analyst, Gerrick Johnson, lowered his rating on Arctic Cat from outperform to market perform, saying that he's received underwhelming dealer reports about sales of Arctic Cat's snow machines and all-terrain vehicles. Oddly enough, shares of the vehicle maker had gained 3% over the two previous days after a different analyst, Scott Hamann of KeyBank, said that demand for products from Arctic Cat and rival Polaris had increased in some regions of the country.
Now what: It's hard to know who to believe here, as the research of both analysts is contradictory. Despite his downgrade, BMO's Johnson is still a believer in the company, saying the ATV market is "booming," and opportunities remain in markets overseas. Johnson's price target allows for a 20% premium in Arctic Cat shares, and his EPS forecast for this year is still slightly ahead of the consensus. Given that information, the market seems to be overreacting here. Factor in the fact that Arctic Cat shares are significantly cheaper than Polaris's, its larger rival, and the stock looks like a buy at today's prices.
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The article Why Arctic Cat Shares Skidded originally appeared on Fool.com.Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool owns shares of Arctic Cat. Motley Fool newsletter services recommend Polaris Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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