Polaris Is An EV Stock Any Investor Can Own We like it when a stock is supported by multiple growth trends and that is what we have with Polaris (NYSE: PII). Polaris is a manufacturer of recreational vehicles such as ATVs, snowmobiles, and jet skis and one that is also getting into the EV market.

Polaris Is Riding More Than One Trend To Success

We like it when a stock is supported by multiple growth trends and that is what we have with Polaris (NYSE: PII). Polaris is a manufacturer of recreational vehicles such as ATVs, snowmobiles, and jet skis and one that is also getting into the EV market. EV as we know is growing at a 40% to 50% CAGR and expected to do so for the next decade, RV and outdoor recreation is also growing at a double-pace with a bright future in store. Others, like Green Power (NASDAQ: GP), REV Group (NYSE: REVG), Camping World (NYSE: CWH), and Lordstown Motors (NASDAQ: RIDE) are all making headway in the EV RV market but Polaris is different because of its niche status, 2% dividend yield, and outlook for dividend growth.

Polaris Guided Above Consensus, We Think It's Too Cautious

Polaris upped its guidance above the consensus at the last earnings report and we think the company is being too cautious. The company is expecting to see revenue grow 13% to 17% compared to last year which is great but doesn't reflect trends in the market. Not only did the company's revenue accelerate into the end of fiscal 2020 but others in the outdoor space are reporting or guiding much higher gains for the 2021 period.

The analysts are bullish on the stock and have been getting more bullish over the past three months. The average rating has moved from a weak buy to a borderline strong buy with three noteworthy calls in the last week or so. Wedbush and Morgan Stanely maintained Overweight and Outperform ratings but upped their consensus to $155 while Raymond James upped the rating and the target. Raymond James moved the stock to Strong Buy from Cautious with a target of $162. The consensus of the three is near $158, $20 or 15% above the current price action, and $30 above the broader consensus.

Why The Analysts Are Wrong

The analysts are valuing this company about 15X to 18X its 2021 earnings and this is all wrong. At this level, the company is being compared to a traditional RV manufacturer like Thor Industries (NYSE: THO) or Winnebago (NYSE: WGO) but it's not like them at all. Polaris should be valued like an EV company the way that VW is now being valued. VW has recently gone all-in on the EV switch and its shares are responding favorably. With Polaris planning to launch its first EV RV next year, we think shares of this stock will begin to respond in the same way.

"Our rEV'd up strategy positions Polaris to help define yet another chapter in powersports innovation," said Mike Speetzen, interim CEO, Polaris Inc. "With the rising interest in electrified vehicles, we are investing in electrification in order to meet the needs of current customers as well as appeal to tomorrow's powersports riders. The all-new electric RANGER is our latest effort aimed at leading the industry forward in electrified powersports vehicles."

The Polaris Dividend Is Attractive, Safe, And Growing

Polaris has an attractive dividend that yields nearly 2.0% with shares trading near $130. The company sports a low 28% payout ratio, an expected decline in payout ratio over the next year, and a 24-year history of increases so we are very positive on future increases as well. The CAGR is pretty low at only 2% but that might change over the next year or two. The company is sitting on ample cash, has low debt, low leverage, and good coverage which means it could already be paying more to shareholders.

The Technical Outlook: Polaris Is Ready To Ride

Shares of Polaris recently touched a three-year high and then pulled back to support. Support is at the short-term moving average which leaves the uptrend intact. The most recent action has the market confirming support at the EMA which leads us to believe this stock will break out to a new high fairly soon. The indicators are still bearish so there may be some more weakness and consolidation before the break to new highs but don't count on it. The early pre-market action has the stock moving higher again and looking like it is ready to move back to the $140 level.