BRP: A Tactical Entry Point Amid Transition and Tariff Uncertainties

The market's skepticism toward BRP Inc. (BRP) has created a rare opportunity to buy into a resilient powersports leader at a discount. Despite recent strong earnings and strategic progress, the stock trades below its fair value, offering investors a tactical entry point ahead of key catalysts in 2025. While near-term risks—such as lingering tariff headwinds and a CEO transition—are valid concerns, the company's fundamentals and preparedness suggest this is a short-term discount, not a long-term write-off.

Valuation Discount: Tariffs vs. Tactical Opportunity

BRP's stock has declined 26.8% over the past six months, despite Q1 2025 results that beat earnings forecasts (EPS of $0.47 vs. $0.4072) and revenue of $1.8 billion exceeding expectations. Analysts at InvestingPro peg its fair value at $39.52, yet shares currently trade around $28. This discount is largely attributed to tariff-related uncertainties, with estimated annual impacts of $60–$70 million. However, the company has already mitigated much of this risk:

• USMCA Advantage: 60% of U.S.-bound vehicles are produced in Canada and Mexico, avoiding the 25% tariffs imposed on non-compliant countries.
• Supply Chain Adjustments: BRP is shifting component sourcing and assembly locations to reduce reliance on tariff-heavy regions like China.

While tariffs remain a short-term drag, their impact is already priced into the stock. More importantly, management has signaled confidence in offsetting costs through pricing strategies and operational efficiency.

CEO Transition: A Smooth Handover, Not a Crisis

BRP's announcement that CEO José Boisjoli will retire by January 2026 has raised concerns about leadership continuity. However, the transition is far from abrupt:

• Timeline: Boisjoli will remain CEO until a successor is appointed (expected within 3–9 months). His 22-year tenure has built a seasoned executive team, including CFO Sebastien Martell, who will ensure stability.
• Legacy: Under Boisjoli, BRP tripled its revenue and market share, expanding its portfolio to seven product lines. His successor will inherit a financially robust company with $300 million in cash and a clear roadmap for growth.

Market sentiment already reflects this optimism: shares surged 13% on the announcement, suggesting investors trust the transition process.

Catalysts to Watch in 2025

The next six months will test BRP's ability to navigate tariffs and transition leadership—but they also offer clear catalysts to drive valuation recovery:

1. Inventory Turnaround: Network inventory is down 21% year-over-year, with management targeting completion of reductions by Q2. This sets the stage for double-digit top-line growth in H2, fueled by new product launches like the 2026 Can-Am electric motorcycles.
2. Tariff Mitigation Progress: By Q3, BRP should provide updates on its supply chain adjustments, potentially easing investor fears.
3. CEO Succession: A credible successor announcement by late 2025 could unlock a “relief rally,” as uncertainty fades.

Why Act Now?

The risks are real—tariffs could escalate, and a misstep in leadership could spook investors. But the upside potential far outweighs the downside:

• Analyst Targets: The highest price target stands at $67.99, implying a 135% upside from current levels. Even a return to fair value ($39.52) would yield a 41% gain.
• Dividend Growth: BRP recently increased its dividend to $0.215/share, rewarding shareholders while it waits for valuation normalization.

Final Call: A Discounted Growth Story

BRP is a classic case of a quality company trading at a temporary discount. Its inventory management, product innovation (e.g., electric Can-Am models), and USMCA-driven tariff resilience form a sturdy foundation. While near-term risks linger, the catalysts of 2025—inventory normalization, leadership clarity, and new product sales—position the stock for a rebound.

For investors with a 12–18 month horizon, this is a tactical buy. The current dip offers a chance to own a powersports leader at a 28% discount to fair value, with asymmetric upside as uncertainties fade.

Act now—before the market catches up to the story.

Data as of May 26, 2025.