This boating manufacturer’s shares were just upgraded by BMO Capital to ‘Outperform’.
Malibu Boats Inc. (MBUU)
From Pivotal Point Trader
The Loudon, Tennessee company is the undisputed leader in the performance sport boat market. It’s main brands, Malibu, Axis and Cobalt, command premium pricing and have become synonymous with engineering, innovation and quality.
Malibu’s business and share price are at a pivotal point. It’s time for investors to take note.
Many will be unfamiliar with the burgeoning watersport industry let alone the need for specialized boats. It’s a niche business that Malibu has been able to grow with prudent sponsorship, promotion and attention to detail.
Every year Malibu focuses on releasing new products and strengthening its dealer network. This vertical integration gives it tighter control over the user experience, more control over margins and average selling prices. It’s a page out of Apple’s playbook.
The family of my daughter’s boyfriend bought a super-cool new Malibu this summer that creates a trailing wave rather than a conventional wake. The kids surf this wave as if they were in Hawaii—no tether required, as with wake-boarding.
The kicker, at least in the near term, may be the weakness in the U.S. dollar. For several years, the company’s international business has struggled under the weight of unfavorable currency translations. Canadian, Australian and European customers loved Malibu products but the strength of the greenback was a headwind. That has flipped. The U.S. dollar is collapsing. Local currencies are rising. That should mean better international sales.
Even without a robust foreign business, Malibu is killing it. In the fourth quarter ended August 30, the company had sales of $75.1 million, a gain of 12.6%. It was also the best result in corporate history over that time frame. Unit sales were 1,004 boats. Average selling price rose 3.4% to $74,800.
Shares have been on a tear this this year, rising 48%. Yet the price/earnings multiple is only 13.3x because earnings are rising. There is resistance overhead at $29, but it should be breached. Buy MBUU now. Target is $60 by 2020; set a stop at $23.25.
Jon Markman, Pivotal Point Trader, issues@e.moneyandmarkets.com, 1-800-291-8545,
September 20, 2017