U.S. Markets closed

Analyst upgrades Vail Resorts, looks for more snow

NEW YORK (AP) -- Shares of Vail Resorts climbed Tuesday as an analyst lifted his rating and price target for the ski resorts operator due in part to an easy year-ago weather comparison and improving economic conditions in Denver.

THE SPARK: Joel Simkins of Credit Suisse raised Vail Resorts Inc.'s rating to "Outperform" from "Neutral" and increased its price target to $81 from $71.

THE ANALYSIS: Last winter's snowfall was light around many parts of the country, leaving limited days for skiers to head out to the slopes. If the snowfall is better this season, skiers, snowboarders and other are more likely to head to resorts. Simkins said in a client note that ski equipment makers like Jarden — whose brands include K2 and Marker — are anticipating some improvement this year given those poor weather conditions a year ago.

Simkins said that you can't underestimate the importance of the weather.

"While most consumers may 'deal with it' and go anyway if they have booked their trip (cancellation penalties are back), bad snowfall does limit potential resort compression and last-minute travel," he wrote.

The analyst also pointed out that better economic conditions in Denver bode well for Vail's Colorado resort, as about 40 percent or more of its skiers come from within the state. Simkins believes that a lower unemployment rate for the Denver area compared with a year ago puts Vail Resorts in position for better visitation from locals this season.

"Keep in mind locals are the bread and butter for these assets and have more flexibility to keep the resorts busy mid-week or off peak dates," he said.

Vail, based in Broomfield, Colo., operates resorts in Colorado, Utah, Minnesota, Michigan, Wyoming and the Lake Tahoe area of California and Nevada.

Simkins also said that improving demand from international guests, particularly those from Europe, could also give a boost to Vail's upcoming season. Although a little more than Vail's customers are from international markets, the analyst said that these visitors tend to stay longer and spend more.

SHARE ACTION: Up $2.34, or 3.2 percent, to $74.67 in afternoon trading. Year to date, the stock is up 34 percent.