Vail Resorts, Inc. MTN is posed to benefit from solid season pass program, marketing initiatives and continual expansion plans. However, decline in traffic due to the global pandemic, high competition and changing weather conditions concern.
Let us delve into the factors that suggest that investors should hold on to the stock for the time being.
Vail Resorts has been witnessing higher season pass sales lately. This is mainly attributable to increased pass product sales for the 2019/2020 North American ski season.
During the fiscal third quarter, the company initiated the launch of Epic Coverage to protect the interests of season pass holders. Replacing the need to purchase pass insurance, Epic Coverage offers refunds in the unlikely event of certain resort closures (due to the COVID-19 outbreak) along with eligible injuries, job losses, and other personal events.
Additionally, the company is providing credits for 2019/20 North American pass holders to apply pass for 2020/21 season. The pass holders will be entitled to a minimum credit of 20% and maximum credit of 80% toward next season's pass. The credits will be available for pass holders who purchase 2020/21 pass products by Sep 7, 2020. It is also offering credits for Epic day pass, Edge Card and other frequency-based products that have unused days remaining.
Moreover, the company is increasingly focusing on digital marketing and media advertising to drive traffic and sales. Notably, it orients its strategy with data analytics to drive targeted and personalized marketing for guests. The company is also benefiting from the recently launched epic day pass (EDP).
Furthermore, it focuses extensively on acquisitions and mergers to build a stronger portfolio of differentiated and varied services. It has acquired a few mountain resorts, hotel properties and other businesses complementary to its own as well as developable land in proximity to its resorts.
Following coronavirus induced shutdowns in mid-March, the company is reopening resorts gradually. Also, the company notified that it has enough liquidity to fund its operations for up to two years, in case of a prolonged lockdown scenario. Notably, this adds to the positives.
So far this year, shares of the company have declined 23.6% compared with the industry’s 48.6% fall.
Vail Resorts has been facing declining traffic due to coronavirus-induced shutdowns. Moreover, owing to uncertainty of the crisis, the management has withdrawn its fiscal 2020 guidance.
Furthermore, the ski resort and lodging industries are highly competitive. There are roughly 470 ski areas in the United States that serve local and destination guests. Thus, Vail Resorts faces intense competition. It is already known how an oversupply of hotels in the United States has given rise to a stiff competitive environment. Subsequently, the company faces heightened competition in the lodging business segment.
Also, Vail Resorts’ business is highly dependent on weather conditions. Particularly, the ski business directly depends on the amount and timing of snowfall. Unfavorable weather conditions can adversely affect skiers’ visits, and in turn hurt the company’s revenues and profits.
Zacks Rank & Key Picks
Vail Resorts currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Consumer Discretionary sector include Activision Blizzard, Inc. ATVI, Brunswick Corporation BC and RCI Hospitality Holdings, Inc. RICK. Activision Blizzard and Brunswick sport a Zacks Rank #1, while RCI Hospitality carries a Zacks Rank #2 (Buy).
Activision Blizzard has a three-five-year earnings per share growth rate of 18.8%.
Brunswick has a trailing four-quarter positive earnings surprise of 8.4%, on average. The company’s earnings beat the Zacks Consensus Estimate in the last four quarters.
Earnings for 2021 for RCI Hospitality are expected to surge 140.6%.
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Click to get this free report Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report Brunswick Corporation (BC) : Free Stock Analysis Report Vail Resorts, Inc. (MTN) : Free Stock Analysis Report RCI Hospitality Holdings, Inc. (RICK) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research