Vail Resorts stock on the rise
March 25, 2010
Vail Resorts’ share price closed at $41.18 Thursday on the New York Stock Exchange and went as high as $42.08 for the day – more than double the amount company shares cost just one year ago when they hit the 52-week low of $19.78. Shares declined in price for the first month of 2010, but have been mostly rising since early February, when shares were around $33.
The volume of shares on Thursday trades was 586,061 – also high compared to recent activity.
Hayley Wolff, a Vail Resorts analyst with Rochdale Securities, a brokerage firm, said there are a few reasons why share prices are improving.
Investors were nervous about the second quarter because of the lack of snow in the early season, leaving many investors off on the side lines, Wolff said via e-mail. The second quarter earnings report showed the company did better than expected, she said, and the “third quarter appears to be shaping up well based on the current tone on business.”
William Marks, a Vail Resorts analyst and managing director at JMP Securities, said the second quarter was a huge surprise. Vail Resorts did well “during terrible snowfall,” Marks said.
“The company maintained its guidance in light of a still bad economy and a bad start to the season, so investors were happy,” Marks said.
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Hotel and resort stocks in general have been on the rise, and Vail Resorts maintains a good edge because its valuation is at a substantial discount compared to other hospitality companies, Wolff said.
“And when taken together with the meaningful cash that will come to the company after they complete the two real estate projects (One Ski Hill Place in Breckenridge and the Ritz-Carlton in Vail), it’s a compelling story,” Wolff said. “Investors are now becoming aware of that.”
Jerry Jones, a Realtor and former Vail Resorts executive, said he’s not sure why the company’s stocks are on the rise. He said there’s been a little bit of activity in real estate, but nothing to indicate the economy is any better.
Jones thinks the share price could be going up based on anticipation of Vail Resorts’ potential purchase of the Whistler/Blackcomb resort in British Columbia, but “that’s just speculation,” Jones said.
Overall, the company’s net revenue for the second quarter was 22.7 percent lower than the same period last year, mostly because of the timing of real estate closings, Vail Resorts Chief Executive Officer Rob Katz said in the earnings call with investors and analysts.
There haven’t been sales during the last few months at either One Ski Hill Place or the Ritz-Carlton, but closings on those projects are expected in late 2010 and early 2011.
The JMP Securities analysis of the second quarter earnings states the analysts can’t read into whether buyers who have put down deposits will close on their units, but that deposits represent a significant amount of money because of the price points, which is a good sign.
There are currently 48 out of 71 units under contract for the Ritz-Carlton project in Vail.
JMP Securities lists two investment risks for Vail Resorts – a reliance on Mother Nature and a maturing industry.
“The ski industry may experience slow to no growth in the number of skiers over the coming years,” according to the JMP Securities analysis.
Skier visits at Vail Resorts’ five ski resorts are up .4 percent over last year, however, even in a still sluggish economy.