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Vail Resorts (MTN) up 50% in 6 Months: More Room to Run?

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Vail Resorts, Inc. MTN is likely to benefit from a solid season pass program, strategic investments and marketing initiatives. However, dismal traffic due to the coronavirus-induced shutdowns and weather-related woes remains a concern.

Let us delve into factors that suggest that investors should hold on to the stock for the time being.

Growth Catalysts

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.

Notably, season pass sales for the 2020/21 North American ski season through Dec 6, 2020 increased approximately 20% in units year over year, while sales dollars remained flat (owing to credit redemption) compared to the prior-year period. Keeping aside the redemption, sales dollars increased approximately 19% year over year. Markedly, the company has been benefiting from its offerings such as Epic Pass, Epic Local Pass, Epic Day Pass and Epic Coverage products.

Meanwhile, the company continues to reinvest in its resorts to boost customer traffic. This includes plans to work on the 250-acre lift-serviced terrain expansion in the McCoy Park area of Beaver Creek. It also plans to install a new four-person high speed lift to serve the popular Peak 7 at Breckenridge. As part of its $35-million capital plan (for Triple Peaks), the company plans to upgrade its lift services at Keystone, Crested Butte and Okemo. Notably, the investments are likely to drive customer access and circulation, thereby boosting the top line.

Moreover, the company is increasingly focusing on digital marketing and media advertising to drive traffic and sales. Notably, its ability to leverage guest data, targeted digital marketing efforts, broad product offering along with associated discounts are likely to benefit the company going forward.

In the past six months, shares of the company have gained 50% compared with the industry’s 24.6% growth.

Major Concerns

The coronavirus pandemic along with the Australian Resort Closures negatively impacted the company’s operations for the three months ended Oct 31, 2020. Following the stay-at-home restrictions by the Victorian government (on Jul 8), Hotham and Falls Creek remained closed for the entire quarter resulting in a significant decline in revenues compared to the prior-year period.

This along with travel restrictions and closure of the Canadian border negatively impacted the company during the fiscal first quarter. Owing to the uncertainty revolving around the crisis, future outbreaks and prolonged shutdowns cannot be ruled out. Meanwhile, the company has refrained from providing the fiscal 2021 guidance.

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 YETI Holdings, Inc. YETI, Monarch Casino & Resort, Inc. MCRI and Boyd Gaming Corporation BYD. YETI Holdings and Monarch Casino sport a Zacks Rank #1, while Boyd Gaming carries a Zacks Rank #2 (Buy).

YETI Holdings has a three-five year earnings per share growth rate of 18.3%.

Monarch Casino has a trailing four-quarter earnings surprise of 44.8%, on average.

Earnings for Boyd Gaming are expected to surge 1,228.6% in 2021.

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