Why Arctic Cat Shares Skidded

 Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of snowmobile maker Arctic Cat (NASDAQ: ACAT  ) were catching nothing but ice today, falling 13%, after a downgrade from BMO Capital Markets.

So what: The relevant analyst, Gerrick Johnson, lowered his rating on Arctic Cat from outperform to market perform, saying that he's received underwhelming dealer reports about sales of Arctic Cat's snow machines and all-terrain vehicles. Oddly enough, shares of the vehicle maker had gained 3% over the two previous days after a different analyst, Scott Hamann of KeyBank, said that demand for products from Arctic Cat and rival Polaris (NYSE: PII  ) had increased in some regions of the country.

Now what: It's hard to know who to believe here, as the research of both analysts is contradictory. Despite his downgrade, BMO's Johnson is still a believer in the company, saying the ATV market is "booming," and opportunities remain in markets overseas. Johnson's price target allows for a 20% premium in Arctic Cat shares, and his EPS forecast for this year is still slightly ahead of the consensus. Given that information, the market seems to be overreacting here. Factor in the fact that Arctic Cat shares are significantly cheaper than Polaris's, its larger rival, and the stock looks like a buy at today's prices.

Don't miss the next update on Arctic Cat. Add the company to your Watchlist by clicking right here.


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