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Malibu Boats, Inc.
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== '''Risks to thesis and price target''' == '''Industry risks''' * Economic conditions could cause greater than expected contraction in the recreational boat industry during 2024 given the cyclicality of the sector. Federal Reserve further tightening the economy by continuing to raise interest rates through 2023 and start of 2024 could lead to lower demand as consumers could face unemployment and higher costs of borrowing. As a result, they would have less disposable income to spend on discretionary items, such as recreational boats. * Another key risk is the potential inflationary pressures that could affect the industry's gross profit margins. The rising costs of essential materials, such as hydrocarbon feedstocks, copper, aluminum, and stainless steel, could squeeze the profitability of manufacturers. Additionally, persistent inflation might lead to increased labor costs, further impacting the company's bottom line. * Seasonality plays a crucial role in the profitability of the company. Historically, quarters 2, 3 are the most profitable for the firm. As such, bad weather conditions during these quarters would lead to lower consumer demand and inevitably to lower sales. '''Company specific risks''' * Malibu Boats has historically invested in new products and acquisitions. Success on these investments is not clear from the beginning and could lead to higher-than-expected expenses moving forward. * The firm has entered into a Tax Receivable Agreement with its pre-IPO owners. There is an obligation to pay 85% of the tax benefits. This is an unpredictable expense as changes in tax legislation could potentially lead to higher or lower expenses. In any case, these payments can be substantial and may significantly impact the company's cash flow and liquidity.
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