Shares in boat dealer MarineMax jumped 6.5% Monday morning after a Citi analyst upgraded the stock from "neutral" to "buy" and raised his target price to $44, up 10%.
James Hardiman told clients that the company (NYSE:HZO) could benefit when the Federal Reserve cuts interest rates, CNBC reported.
That's because the cost of financing pushes up the total price of boats and other big-ticket items, CNBC said.
"At the most basic level, HZO is a strong play on the Fed pivot," Hardiman wrote in a Monday note. "Boat affordability has been hit hard (maybe hardest) by the higher for longer rate environment and stands to benefit mightily in a soft-landing scenario."
The Fed is widely expected to cut its benchmark interest rate by at least a 0.25 percentage point, and possibly by a 0.5 percentage point, after the Federal Open Markets Committee meets for two days next week in Washington, D.C.
The benchmark rate has been 5.25% to 5.5% since July 2023.
Hardiman also said that there were opportunities for MarineMax to monetize marina real estate and that it could face investor pressure to do so.
"This story embodies both substantial upside and limited downside, and is worth a second look for investors looking for sizable risk-adjusted returns," Hardiman wrote.
Clearwater, Florida-based MarineMax bills itself as "the world's largest lifestyle retailer of recreational boats and yachts," with more than 125 locations, including over 75 dealerships and 65 marina and storage facilities.
The company also operates MarineMax Vacations in Tortola, British Virgin Islands, where it offers luxury charter trips.
Its shares opened at $31.11 Monday, up from Friday's close of $29.04, and closed at $30.30, up more than 4.3% for the day.
