Analyst Note| Jaime M. Katz, CFA |
Although unit demand in 2020 was favorable for many of the companies in the traditional recreational vehicle space, we surmise the original equipment manufacturers with meaningful market shares still have room to see further retail sales gains ahead. These market leaders have carved out new verticals for growth, which are the linchpin in our outlook for positive recreational product demand over the next five years. With the addition of boats, electric alternatives, and access to a broader demographic target market, we expect the recreational products category could grow at 3% between 2021-25, growth that we have directionally incorporated into our outlook for wide-moats Polaris and Harley-Davidson as well as narrow-moats Malibu Boats and BRP. This would represent a slowdown from retail unit growth of 3% in ATVs, 10% in side-by-sides, and 8% in personal watercraft experienced in the five years ending 2020, which closed with robust pandemic-driven takeaway (in the five years ending 2019 retail unit sales averaged negative 2%, 6%, and 8%, respectively).