Analyst upgrades Vail Resorts stock
June 3, 2012
Vail Resorts shares rose last week in light of an analyst upgrade at Stifel Nicolaus, also causing the stock’s trading volume to more than double since the previous week.Stifel Nicolaus analyst Steven Wieczynski raised the stock’s price target to $53, bringing attention to the stock after shares have posted two months of declines by about 12 percent. The stock closed Friday at $43.47, up from May 25’s close of $41.49 before the analyst upgrade. Volume skyrocketed after the upgrade – Friday’s trading volume was 117,957, while Tuesday’s was 360,120 and Wednesday’s was 351,301 – showing interest in the stock increased alongside the upgrade.The “buy” rating means the firm expects the stock to outperform the Standard and Poor’s 500 by more than 10 percent during the next 12 months.”With Vail shares declining 12 percent in the last two months (compared to the S&P decline of 5 percent), we believe this has created an attractive entry point as we push toward the 2012-13 ski season,” Wieczynski wrote in a note to investors. “While Vail shares have historically traded lower (7 percent average decline during summer months back to 2007) during the summer months, we believe continued encouraging demand signals toward the 2012/2013 ski season, continued strong international visitation, revised summer program offerings, and solid free cash flow support could all be catalysts for the shares.”Wieczynski cited “encouraging season pass sales,” even though it’s still early in the selling process. He told investors that sales for the upcoming ski season should exceed last year’s total spring season pass sales in both units and sales dollars.”Additionally, we believe the strength witnessed in pass sales to date could be signaling a degree of pent-up consumer demand as skiers look to put the unfavorable 2011-12 ski season weather conditions behind them,” the note said, adding that despite the low snow year, Vail Resorts was still able to push through 6 percent to 8 percent increases on pass prices.
Other Vail Resorts analysts have also maintained that Vail Resorts shares (MTN on the New York Stock Exchange) are attractive because of the company’s “asset quality, long-term pricing power, solid balance sheet, free cash flow, and strong management team,” according to the latest investor note from Credit Suisse last week.Credit Suisse analyst Joel Simkins put the stock’s price target at $55 in that note, while JMP Securities analyst Will Marks put the price target at $57 in his latest note to investors earlier in May.While Bank of America Merrill Lynch analyst Shaun Kelley maintained a neutral rating for MTN as it enters a seasonally slow period, he wrote in a May 1 note to investors that Bank of America Merrill Lynch recognizes “the growth potential of its assets in a more normalized operating environment.”Some analysts think the summer could become such a more “normalized” operating environment, especially with the passing of the Ski Areas Recreational Opportunity Enhancement Act, legislation passed by Congress last year that allows for more on-mountain summer activities on public lands.Wieczynski told investors that Stifel Nicolaus anticipates Vail Resorts to announce advanced plans for such summer projects in the near future.”Vail has indicated it has been having constructive conversations with Forest Service officials and we believe management could be ready to unveil a more comprehensive plan in the next month or so,” Wieczynski’s note said last week.None of the analysts mentioned the fact that the 2012-13 ski season is also Vail Mountain’s 50th anniversary – something Vail Resorts and the Vail Mountain marketing team are not taking lightly. The resort has celebrations spanning nearly a year, beginning this summer with a celebration for Vail pioneers. That, combined with the company’s strength and the ability to put a poor snow year behind it, could add to all of the recent excitement over company stock.