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Vail Resorts (MTN) Banks on Strategic Investments, Traffic Dismal

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·4 min read
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Vail Resorts, Inc. MTN is likely to benefit from investments in expansion projects, technology program and marketing initiatives. However, dismal visitation owing to Canadian travel restrictions and border closures are concerns.

Let us discuss the factors that suggest why investors should hold on to the stock for now.

Growth Catalysts

Vail Resorts continues to reinvest in its resorts to boost customer traffic. During the fiscal first quarter, the company highlighted some of its investments that were previously deferred owing to COVID-19.

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 enhancing the top line.

Moreover, the company is increasingly focusing on digital marketing and media advertising to drive traffic and sales. Vail resorts completed one of its final stage of modernization project and invested in technology to program its data-driven marketing efforts. Notably, its ability to leverage guest data, targeted digital marketing efforts, broad product offering along with associated discounts are likely to yield, going forward.

Meanwhile, the company stated that it holds enough liquidity to survive the coronavirus pandemic for some time. As of Jan 31, 2021, the company had $1.3 billion of cash on hand, $418.6 million of U.S. revolver availability under the Vail Holdings Credit Agreement and $222.1 million of revolver availability under the Whistler Credit Agreement. Notably, the amount represents sufficient liquidity to cover near-term obligations of $112.8 million. Although Vail Resorts’ long-term debt at the end of the fiscal second quarter stood at $2.8 billion (compared with $2.4 billion in the previous quarter), the company stated that it has sufficient liquidity to fund its operations. During the fiscal second quarter, debt-to-capital ratio came in at 0.6, almost flat sequentially.

Major Concerns

In the past three months, shares of the company have gained 8.4% compared with the industry’s 22.1% growth. Notably, the company’s operations were negatively impacted by the coronavirus pandemic. During the fiscal second quarter, the company’s operations were hurt by Canadian travel restrictions and border closures. Notably, the company witnessed dismal visitation owing to the pandemic led restrictions in Whistler Blackcomb, Tahoe and Vermont. During the quarter, total visitation across North American destination mountain resorts and regional ski areas were down 5% year over year. Although, the company is witnessing sequential improvements in visitation, it is still behind the pre-pandemic levels.

Owing to the uncertainty revolving around the crisis, future outbreaks and prolonged shutdowns cannot be ruled out. Moreover, the company refrained from providing the fiscal 2021 guidance.

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 Crocs, Inc. CROX, Camping World Holdings, Inc. CWH and RCI Hospitality Holdings, Inc. RICK. Crocs and Camping World sport a Zacks Rank #1, while RCI Hospitality carries a Zacks Rank #2 (Buy).

Crocs has a three-five year earnings per share growth rate of 15%.

Camping World has a trailing four-quarter earnings surprise of 103.2%, on average.

RCI Hospitality 2021 earnings are expected to surge 241.2%.

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