Citi upgrades BRP to Buy, says Polaris valuation gap will close

Citi upgraded BRP Inc. (DOOO) to Buy from Neutral with a price target of $94, up from $81. The firm also opened up a pair trade of overweight BRP, underweight Polaris (PII). Citi expects BRP to outgrow Polaris going forward and for the stocks’ “valuation delta to close over time.” BRP continues to chase demand, as opposed to a much more aggressive stance taken by Polaris, which appears to be “punting the $750M replenishment headwind into 2024,” the analyst tells investors in a research note. The firm says BRO trades at a “significant” price-to-earnings discount to Polaris. After conducting a deep dive on power sports inventories, Citi thinks BRP is well positioned to go after its fiscal 2025 targets, “despite broad investor skepticism/disbelief.”