On Friday, Citi Research upgraded the firm’s rating for Thor Industries (NYSE:THO) to Buy from Neutral, also raising the price target on the stock to $122 from $100. In addition, Citi opened a 90-day upside catalyst call on Thor in anticipation of a ramp in orders.
The upgrade follows close on the heels of last week’s earnings announcement where disappointing margins and a “tempered industry outlook” led to a fall in the company’s shares. While Citi points out that in the past they have resisted multiple low entry points, this time they believe the worst may be behind THO.
“We think…February declines will be much more modest than those in January, and that the industry is likely to turn positive in April/May. From there, we think dealers will feel more comfortable on the order front, OEM guidance is likely to stabilize, and shares are likely to appreciate, potentially quite nicely,” said analysts in the note.
The 90-day upside catalyst call comes despite Citi expecting two or three more months of declines, where they will be keen on the lookout for signs of a positive industry inflection in April-May.
“While this is not out of line with industry expectations, we believe it could serve as the green light for dealers to ramp orders, for OEMs to gain confidence in their guidance, and for investors to dip their toe back into the THO story, bolstering valuations,” added Citi Research analysts.
Affordability tailwinds this year (price and rate cuts) are set to benefit the RV industry and THO and lead to an improvement in retail demand.