JPMorgan has made a significant adjustment to its stance on Camping World Holdings (NYSE: NYSE:CWH), downgrading the stock from Overweight to Neutral and drastically reducing the price target to $24 from the previous $285.
The change comes as a response to a series of lowered earnings estimates for the second half of 2024, uncertain recovery prospects for RV prices, and concerns over the company's high financial leverage. The relative resilience of Camping World's share price amidst these downward revisions also factored into the downgrade decision.
The downgrade reflects a broader reassessment of Camping World's financial outlook amid a challenging market for recreational vehicles (RVs). The analyst noted a lack of visibility regarding the timing and extent of the recovery in new and used RV prices, which is currently affecting near-term financial estimates. Despite the RV industry's initial boom post-COVID-19, with consumers favoring RV travel to avoid virus contraction, the market has since seen a significant downturn.
Camping World's financial performance had exceeded expectations following the boom, with the company posting $942 million in EBITDA for 2021, far surpassing JPMorgan's estimate of $425 million and the Bloomberg consensus of $431 million at the time of the initial upgrade in September 2020. However, the current Bloomberg consensus for 2024 EBITDA stands at $179 million, a stark decline from the $454 million projected a year ago and $676 million two years prior.
In other recent news, Camping World Holdings, Inc. has expanded its credit capacity by $50 million, enhancing its financial flexibility. This move does not affect the company's option to request an additional $100 million of borrowing capacity. No funds were drawn from this additional capacity at the time of the amendment's closing.
In terms of earnings and revenue, Camping World reported a 5% decline in revenue to $1.8 billion for the second quarter of 2024, mainly due to a decrease in used vehicle volume. However, the company also saw a 6% increase in new vehicle revenue, totaling $847 million, and a record gross profit of $35.4 million for its Good Sam services and plans.
Camping World Holdings also declared a regular cash dividend of $0.125 per share, payable to shareholders of record as of September 13, 2024. The decision will be subject to the company's Board of Directors' evaluation of various factors, including operational results and financial health.
On the analyst front, Roth/MKM maintained a Buy rating on Camping World but lowered the price target from $28.00 to $26.00. The firm highlighted Camping World's resilience in challenging market conditions and expects growth from new RV market share gains and potential strategic acquisitions.
Despite anticipating continued pressure on used vehicle volumes and margins in the upcoming quarter, Camping World remains optimistic about growth in 2025.
InvestingPro Insights
Recent data from InvestingPro provides additional context to JPMorgan's downgrade of Camping World Holdings (NYSE:CWH). The company's market capitalization stands at $1.04 billion, reflecting its current position in the market. InvestingPro Tips highlight that CWH's stock price movements are quite volatile, which aligns with the analyst's observations about the company's performance relative to the broader market.
The company's financial metrics reveal some challenges. With a P/E ratio of -78.25 and a negative return on assets of -0.95% for the last twelve months as of Q2 2024, CWH is currently not profitable. This data supports JPMorgan's concerns about the company's financial health and the uncertain recovery in the RV market.
Despite these challenges, CWH has maintained dividend payments for 9 consecutive years, with a current dividend yield of 2.16%. This could be seen as a positive sign for income-focused investors, although it's worth noting that the dividend growth rate has declined by 80% in the last twelve months.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for CWH, providing a deeper understanding of the company's financial situation and market position.
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